The real reason behind Hero Honda Breakup..
The breakup of Hero Honda after a marriage spanning 25 years sent shockwaves across the entire Indian auto industry. Hero Honda had brought the concept of a two–wheeler in India’s collective consciousness. It is also regarded as the largest manufacturer of two–wheelers in the world. Then why the breakup of such a uber successful marriage ? The reason cited includes disagreement over various issues and deals.
But then the ground situation points to something different
By 2015, the Bharat IV emission norms would have to be implemented by all the two – wheelers. These are very different from the Bharat III norms being employed today. Earlier this year the norms were upgraded from Bharat II to Bharat III for two – wheelers while to BS – IV for certain cars and SUVs.
The Honda group has invested a lot into technology and R & D because at the same time in the west especially the European region, the movement has been onto the Euro – V norms. Now this up gradation means greater investment in technology and innovation. The fact of the matter is that at the end of the day Honda and Hero Group are competitors.
And therefore Honda India is vary of sharing this technology with the Hero Group. This would have also resulted in greater royalty payments towards Honda which has already impacted the profitability of Hero Honda for many years.
So it’s all about competition?
Yeah obviously. Divorces happen if either of the partners have issues with each other. And in this case Honda has finally realised that the Hero Group is nothing but competition.
In a country where the disposable income is continuously increasing with the economy growing at more than 8.5% p.a. and new players coming in everyday, which company would want to lose out on this market?
Since the name Hero – Honda can be used upto 2015, I am sure it gives a great chance for both – the Hero Group as well as Honda India to develop their respective strategies. With the infrastructure already there and continuous research and development, both these organizations would be really successful in the long run.
It all depends on how fast they are able to leverage their individual identities and move out of the “Desh Ki Dhadkan” bit!