So, Honda has decided to exit Hero Honda. The 26-26 joint venture between the Munjals and Honda dates back to the 1980s when the first wave of liberalisation took place. Apart from Honda, two other Japanese motorcycle makers had come to India at that time: Suzuki with TVS and Yamaha with Escorts. In the past, there has been talk, more than once, that the two partners will go their separate ways.
About ten years ago, Honda had set up a fully owned subsidiary that made scooters to begin with and later motorcycles too. This added grist to the rumour mills. But the two partners stuck together and proved their detractors wrong. This time the breakup seems to be final. The fine print of the divorce papers is not yet out. Maybe Hero Honda (or whatever it is called once the Japanese partner pulls out) will be able to source technology from Honda for some more time in the future.
Joint venture as an entry strategy for India had lost all its relevance for overseas companies many years ago. When there were curbs on foreign direct investment, joint ventures made sense. Indian businessmen gave their name on rent to their foreign partners. Their contribution in the company, at best, was restricted to environment management — clearances from the various departments and ministries of the government. Indian partners, on their part, said they brought the knowledge of local markets to the venture. But the argument lacked conviction. Most of them were a product of the Licence Raj when core competence meant the right connections with bureaucrats and politicians and not marketing acumen or manufacturing excellence. Still, several businessmen made a living off it.
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