Rivals hoping Hero won’t go far without Honda

As the 26-year-old joint venture (JV) between the Hero group and Honda Motor draws to a close, leading motorcycle giants are sensing a massive “strategic opportunity.” TVS Motors chairman Venu Srinivasan said though the ramifications of the split would not have an immediate impact, in the long run the effect of the split would certainly be felt.

“In the short term, I don't foresee any major impact. Just because Hero and Honda have split, it does not mean that their bike Passion would stop selling, however, it gives a strategic opportunity. The impact would be felt in the long run, especially on how Hero launches new products for the domestic market without Honda’s support,” Srinivasan said. He said TVS Motors would increase dealerships by at least 15% in 2011 from roughly 650 dealerships at present.

The Indian subsidiary of Japanese premium motorcycle maker Suzuki Motor concurs with the view. Suzuki Motorcycle vice-president (sales & marketing) Atul Gupta said Hero-Honda split would cause uneasiness in the company's dealers. “The dealers may feel jittery about new products which would be developed without the Honda brand name,” he said.
Gupta said though in the next three to five years there would be minimal impact on the two-wheeler market, post 2016 the market would see a “major change.” He said, “When the change happens it would be very sudden,” Gupta added. Suzuki Motorcycle has set a target to reach up to 1 million units per year from the current 3 lakh units in the next five years.

A senior executive of another two-wheeler maker said competition in the motorcycle market would become intense once the divorce is complete. “Every motorcycle maker has lined up plans to expand dealerships – it's a model in which Hero Honda has excelled. The scenario in the two-wheeler market is set to Group chairman of Bajaj Rahul Bajaj said the Hero Group would not be impacted till 2014 when the technology pact is set to expire. He however said that it would be a "challenge" for the Munjals to set up their on R&D capabilities. "For the next four years the Munjals will not suffer at all. But to set up good R&D capability it takes time and is not easy," Bajaj said. Rubbishing rumours that the Hondas would not give the appropriate technology to Hero once the JV breaks, Bajaj said, "Munjals have been sourcing technology from Honda for 25 years. So there is no reason for Hondas to change that," he said.

Partner at the global consultancy firm Booz & Company Vikas Sehgal said since the Hero group management would be caught up in easing out friction with its erstwhile partner Honda Motor post the split, the management's attention would be diverted. “Bajaj and TVS could swamp the market once Hero-Honda go separate ways. It would lead to a massive shift in momentum in the two-wheeler market,” he said.