Hero and Honda break up news was doing its round for the past few months. All speculations came to end when Hero Group and Honda Motor Co  signed their parting agreement yesterday. The actual splitting of Hero Honda joint venture will take some more time. The formal break up announcement brought end of one of the most successful joint venture in Indian automobile sphere. As per the agreement, the  Munjal family-promoted Hero Group will buy Honda Motor Co’s  26% share in Hero Honda Motors Limited (HHML) for undisclosed amount.

Honda will continue supporting Hero Group with technology till June 2014, meanwhile the latter can set up their own research and development infrastructure. Hero Group is now free to search for alternate technology partner for their future endeavours. The agreement also paving ways for face to face competition between Hero and Honda products outside India especially in South East Asian markets. Till June 2014, Honda will continue enjoying royalty benefits from Hero Group.

“We hope to sign the definitive agreement in the next few weeks. There will be a continuous flow of new models … some on a completely fresh platform. The deal is in the best interest of the company and its minority shareholders. The company wants to do much more now,” said Mr Pawan Munjal, Managing Director and CEO, HHML.

“When we entered India, the idea was to explore the market, but much has changed since then. Both companies have their own vision of what they want,” said  Mr Fumihiko Ike, Managing Director and COO, Honda-Asia and Oceania.

“Our joint venture agreement will be dissolved, but our positive relationship will continue. Honda will grant the necessary license to enable continued production and sales of current products as well as license for new products,” he added.

So what will be the future of both players?

Hero Group may have to put their best efforts to set up an efficient R&D organization which can bring flawless products similar to Splendour and Passion. But they have the advantage of very strong sales and service network across the country. Honda, though present in India since 2000, still lacks dealerships and after sales network. But they enjoy the leadership in product development which made all Hero Honda products instant success. Honda has an advantage in this situation as they have already built up a good business in Indian market.

We hope Hero Group will repeat the story of TVS after TVS-Suzuki break up.

Let us wait and watch who will emerge as winner at end of the race.

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