Honda, Hero set to renew alliance

10-year extension on cards.

Japan's Honda Motor Company is likely to renew its 10-year old technical alliance with the Munjals-promoted Hero group for Hero Honda Motors Ltd by another 10 years. This will be done after the present agreement between the two company expires in June 2004.

"Our (Hero group) intention is to get it extended. There is still two months time. The technical agreement should easily be renewed for another 10 years," company sources said.

The agreement will be renewed even as Honda's 100 per cent subsidiary, Honda Motorcycle and Scooter India (HMSI), gears up to launch a 150cc motorcycle in the second half of this year.

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. The company hopes double-digit growth in sales during 2004-05. HMSI is the market leader in ungeared scooters, having sold 310,036 scooters during the year ended March 2004.

The possible renewal of the technical alliance follows strong speculation in the recent past that Honda might not supply two-wheeler technology to Hero Honda after June 2004 and instead focus on HMSI, the world's second-biggest market after China.

Hero Honda and Honda had signed the 10-year technical agreement in 1984, which was extended by another 10 years in 1994. In 1999, Honda set up a wholly-owned subsidiary, HMSI, to make scooters for the first five years.

Both Hero Group and Honda officials have earlier said the two partners will continue to work together and target 50 per cent of the domestic two-wheeler market by 2005. They have also said both the partners will jointly decide the future launch of products and the products of both the companies would be complementary to each other.

HMSI is readying to launch a 150cc this year following the expiry of the current agreement, which stated that HMSI can produce motorcycles, while Hero Honda can manufacture scooters after June 2004.

The launch is likely to be followed up with a 200cc motorcycle next year.

Extending friendship

• 1983 Joint collaboration agreement signed.
• 1984 Company incorporated.
• 1985 First motorcycle (CD-100) launched.
• 1987 Plant at Dharuhera.
• 1994 1mn motorcycle produced.
• 1997 Second plant at Gurgaon.
• 1998 2 mn motorcycle produced.
• 2001 5 mn motorcycle produced.
• 2004 Over 2 mn motorcycles sold in last financial year.