The Japanese manufacturer currently holds a 26% stake in Hero Honda, a joint venture with the Hero Group of India established in 1984. Hero Honda claims a 59% market share of Indian motorcycle sales with a record 1.29 million units sold in the quarter ending Sept. 30.
Despite the success of the partnership, Honda is on the verge of selling its stake to the Hero Group’s founders, the Munjal family, and various investment funds. Japan’s Nikkei Business Daily reports the deal will see Honda’s share sell for 100 billion yen (US$1.2 billion), a price well below market value. The Hero Group could in turn increase the percentage of sales its pays as royalty for use of Honda’s technology. Honda currently receives 2.5% of Hero Honda’s annual sales.
Honda will then focus its resources on its wholly-owned subsidiary, Honda Motorcycle and Scooter India (HMSI), established in 1999. While Hero Honda is dominating the Indian market with low displacement models such as the 125cc Super Splendor and the 150cc Hunk, HMSI has carved itself a 14% market share with models such as the 150cc CB Unicorn Dazzler, and 109cc CB Twister, as well as larger models such as the VFR1200F, CBR1000RR and the CB1000R.
HMSI announced in March it plans to open a new production facility in Tapukara, Rajasthan, India, to begin building 600,000 units a year by late 2011. HMSI already has a facility in Manesar, Haryana, India which produces 1.55 million units a year.
The Indian market is expected to be a major battleground for the motorcycle industry with foreign manufacturers including Ducati, Harley-Davidson, Hyosung, and Piaggio all trying to establish their piece of the world’s second largest motorcycle market. An estimated 10 million motorcycles and scooters were sold in 2009-2010 with double-digit growth expected for 2011-2012.