Hero and Honda: Partners no more

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New Delhi, Dec 17: It was an association that was both iconic and unique. But after 26 years of bonding with the motorcycle users in India, Hero Honda is ready to split. The partnership between Japan"s Honda Motor and India"s Hero Group mutually ended on Thursday, Dec 16.

The reason for the break-up is considered to be changing market dynamics and expansion ambitions beyond India. Honda Motorcycle & Scooter India is India's fourth-largest two-wheeler maker. But the news of the break-up has not gone down well with the investors and users alike.

“The split in Hero Honda partnership may affect the confidence of their dealers, who had enjoyed the market dominance for a long time," says Atul Gupta, Suzuki Motorcycle India VP (marketing & sales).

Pawan Munjal, CEO and MD of HHML, said that the Hero Group will buy 26% stake in Honda by raising debt initially. Honda's current stake with Hero motors is valued at close to $2 billion. The decision will trigger a price-war in the motorcycle market.

Honda plans to re-invest in the booming motorcycle business in India, which also happens to be the second-largest in the world after China. Hero Motors will use the Honda name till 2014 and will have to face challenges protecting its stable market presence that stands at 60% in motorcycles and 43% in two-wheelers. Also, its dealership base of over 4500 also needs to be protected.

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