Honda gets ready to split


Honda Motor Company, Japan’s second largest auto maker, says it is evaluating proposals for a deal which could even see it exiting from its joint venture with the Munjals of the Hero Group in Hero Honda, now the world’s biggest two-wheeler manufacturing company.

The proposal was made by the Munjals to Honda Motor. The latter’s technology licensing agreement for the JV is to end only in 2014. Honda Motor has 26 per cent stake in Hero Honda. The Munjals, with individual stakes and through a couple of investment companies, hold 26.21 per cent. They have reportedly shown interest in buying a direct six per cent stake from Honda in the company.

Sources add that most of the PE companies approached by the Hero Group have not shown keen interest in the deal.

The company plans to retail this bike in emerging markets such as China and India. Presently, no motorcycle in India is sold at such a price, although Hero Honda and Bajaj Auto have said they were trying to develop one for Rs 15,000-20,000.

Honda’s plan is to be become the entry-level bike producer for low-income families in developing markets like India. For thousands of buyers in India every year, the Splendor from Hero Honda, the largest bike brand in the world, remains their first one. The Splendor, known for its superior mileage, costs around Rs 41,200 and is one of the lowest priced products in the bike market, besides the CD-Dawn costing Rs 34,500 (ex-showroom, Mumbai).

This new low-cost bike from Honda will challenge established products such as the Splendor, while aiming to offer equal performance in terms of power and mileage.

Honda Motorcycle & Scooter India, the wholly owned subsidiary of Honda, Japan, is setting up a new factory, to take its total annual capacity to 2.2 million units per annum from 1.6 million units presently.