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Honda renews Hero alliance

03-June-2004
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Honda renews Hero alliance

Japan's Honda Motor Company on Wednesday renewed its 20-year old technical agreement with the Munjal-family promoted Hero Group for Hero Honda Motors till 2014.

The two partners have also decided to work together to launch new motorcycle and scooter models to garner 50 per cent of the domestic market by 2005.

Hero Honda Motors also announced its decision to soon launch scooters with technology from Honda while Honda's 100 per cent subsidiary, Honda Motorcycle and Scooter India would roll out a 150cc motorcycle by October this year, officials from both the companies told a press meet here.

The agreement was renewed after the previous agreement expired this month. Hero Honda Motors had inked an equity and technical alliance agreement with Honda in 1984, which was renewed in 1994.

The renewed agreement was signed between S Toshida, managing director and chief operating officer for regional operations (Asia and Ocenia), Honda Motor and Pawan Munjal, managing director, Hero Honda.

"The strong partnership with Hero group has now spanned 20 years. It has proven to be a highly successful business venture among all Honda businesses worldwide. We would like to reaffirm our support for new products by Hero Honda," said Toshida.

The Hero Group and Honda have 26 per cent stake each in Hero Honda, the country's largest two-wheeler maker with sales of 2.07 million motorcycles during 2003-04.

According to analysts, the foray of Hero Honda into scooters and that of Honda into motorcycles was an indication that the Munjals might reduce their stake in Hero Honda in future.

This may finally lead to the merger of both the companies. More so, as the Hero Group has no plans to buy equity in HMSI.

Toshida, however, said Honda has no plans to hike its stake beyond 26 per cent and would continue to provide technology to Hero Honda. According to Munjal, the two companies would produce 100-150cc motorcycles but these would be complementary instead of cannibalising each other. He said a model committee has been set up comprising officials of Hero Honda, HMSI and Honda Siel Cars to decide on the launch of future products in the country.

HMSI, which was set up in 1999, dominates the ungeared scooter market, having sold 310,036 scooters during the year ended March 2004. Munjal said Hero Honda was in the process of setting up its third manufacturing plant, for which it has shortlisted four states.

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