Split unlikely to impact Hero Honda business soon

The parting of ways between Hero and Honda is unlikely to impact either product cycles or prices of the joint venture — Hero Honda Motors Ltd (HHML).

Since the current technical agreement is being superceded by a new one soon, existing bikes as well any future model will be covered as far as technology availability from Honda goes, so that new launches will happen as planned. And this situation is unlikely to change till at least 2014.

What could change, however, is the focus and capability of new bikes Hero might bring in henceforth.

HHML managing director Pawan Munjal said the endeavour from now on will be to do its own research and development (R&D), bring down cost of products and focus on the rural markets.

HHML has already made inroads into the smaller towns and villages and this will only increase going forward.

But revving up R&D will take a lot of hard work, a two-wheeler industry veteran said.

“This they should focus on completely for the next few years, when Honda will continue to give them technology… Hero hasn’t really worked on this aspect since with Honda around, it could not. But now, Bajaj and TVS have shown that R&D in India is very much possible.”

And this is important because of the changed dynamics, said another old industry hand. “The two-wheeler landscape will change now and initially competition will increase since Honda will get very aggressive in the Indian market. Honda will behave like a new player,” he said.

Meanwhile, Honda’s 100% arm Honda Motorcycle & Scooter India (HMSI) is expected to get aggressive and has already told parts’ suppliers of its intention to double production capacity to 9,000 units a day from FY12.

Currently, the best sellers from Hero Honda are Splendour and Passion 100 cc bikes —- these two brands together account for 7 out of 10 bikes sold by the company.

HMSI also sells 110 cc CB Twister, but at a slight premium to the twin offerings from HHML.

According to vendors, HMSI may not get any fresh product in the 100 cc segment in the near future.