When the Hero Group decided to break its over-two-decades-long two-wheeler joint venture with Honda Motor Co late last year, changing market dynamics and Indian companies’ growing confidence in their own R&D capabilities were the overriding reasons.
Personality clashes between the Japanese and the Munjals did play a part, according to a Hero Honda insider. But by and large, Indian entrepreneurs are now sure of developing their own capabilities or having the cash to shop for these abroad. So the Japanese were shown the door, in a deal where they seem to have made a rather bad bargain.
In the last six years, many global biggies have had to bite the dust in India after failing to get along with Indian partners and most of them are now floundering in their solo sojourns.
Mahindra & Mahindra’s ambitious entry into sedans with French major Renault in early 2005 could not last either. First, the Logan sedan’s sales suffered because of uncompetitive pricing and thereafter because the two owners couldn’t agree on whether to modify its length and engine displacement to avail of lower excise duty. Renault did not want a global product to be modified, whereas Mahindra wanted to do the only sensible thing: chop Logan to bring it under 4 metre. In the end, the car was sold to Mahindra and Renault walked out of the venture. Mahindra is now making a success of it whereas Renault is trying to once again find its feet in India.
Another alliance — the Tata-Fiat JV — for manufacturing and selling cars together is also on the verge of a breakdown. The alliance came about in December 2007 when Ratan Tata and Sergio Marchione wanted their friendship to translate into a business partnership where Tata would distribute Fiat cars and in turn get to manufacture some of its cars at Fiat’s Ranjangaon facility. Four years down the line, Fiat sales remain moribund and even Tata Motors’ passenger vehicle sales are floundering. Lack of coordination between the two companies on sales strategies, product overlap in some cases and a general inability to maximise synergies have brought the JV on to the brink.
Take the case of a proposed JV between the Hero Group and UK’s electric vehicle (EV) firm Ultra Motor for electric two wheelers, which was called off within a year of co-branded scooters and bikes being launched here in 2008. Under the terms of the deal, Ultra was to provide EV motors for the two wheelers while Hero Cycles, the privately held bicycle making arm of the Munjals, was to assemble the vehicles at its Ludhiana unit. Ultra Motors chairman Joe Santana talked at the time of divergent visions of the two partners. He also mentioned how Hero was adopted a slow-and-steady approach whereas Ultra wanted things to move fast. Ultra, like other foreign vehicle makers, did not hesitate to go it alone in India after this breakup.
Now, a global alliance between Suzuki Motor Co and Volkswagen is on the brink. This could have had major implications for India, but SMC chairman Osamu Suzuki has made it clear that Suzuki does not face an immediate difficulty.
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