COMMENTARY
INTERVIEWS
SPECIALS
CHAT
ARCHIVES

Mobike partners Honda, Hero group to make scooters, 3-wheelers

Honda Motor Company of Japan has decided to re-enter the scooter market in India as also foray into three-wheelers segment in a joint initiative with its existing joint venture company Hero Honda Motors Limited.

Honda would initially set up a wholly-owned subsidiary for the scooter venture and an application to this effect was filed today with the Foreign Investment Promotion Board.

As per the application, a small percentage of equity in the venture would be divested in favour of the Hero group at a later date, Hero Honda director Pawan Munjal said.

The subsidiary -- Honda Motorcycle and Scooter India -- to be capitalised at $ 43 million, is set to start production of 4-stroke scooters at an initial pace of 100,000 units a year, by the second half of 2001 at a new plant to be built near Delhi.

Honda plans to raise the annual output to 200,000 units by 2004 and production of a 4-stroke motorcycle is also planned in the future. It will invest $ 34 million in the new plant.

Honda said the company would employ 500 staff initially and plans to increase to 1,800 by 2004.

''The subsidiary would initially produce scooters. But if and when there is a market demand, we have the option of making three-wheelers also from the unit,'' Munjal said.

Honda, through this subsidiary, would focus on scooters for a period of five years and, thereafter, Hero Honda and the Honda subsidiary shall expand the range to encompass all two- and three-wheelers.

HHML and HMC have arrived at a strategic understanding to this effect at a high level meeting last week. The companies have embarked on an aggressive plan to increase the market presence in India.

HHML, a leader in the motorcycle market, would increase the existing model line-up with a continued focus on motorcycles.

Hero Honda chairman Brijmohan Lall said the company would continue its focus on motorcycles and resources would be directed to adoption of contemporary technologies and steady expansion of capacities.

''With the target of gaining a formidable marketshare in two-wheelers, both the companies have decided to work in a complementary arrangement,'' he said.

Honda Motor's senior managing director K Suzuki said Hero Honda and HMC enjoy a very synergetic relationship. ''Honda intends to further build on its long-term association by enhancing cooperation and support to Hero Honda in terms of technology, newer models, information and knowledge sharing to ensure ambitious growth plan for Hero Honda.''

India being an important market for Honda, the Japanese major is planning to expand its activities in the newly formed research and development centre in Delhi. This would provide the most suited base to both the companies with a shortened product introduction cycle to meet the fast changing needs of the Indian customers.

This would mark Honda's re-entry into the Indian scooter market. It had severed ties with the Arun Firodia-run Kinetic Engineering Limited. Industry ministry officials said the proposal is likely to sail through with the FIPB as its erstwhile partner has not voiced any concern against the proposed subsidiary.

''The Firodias are not against the venture...They have not even once asked the ministry to scuttle the plans,'' the sources added.

Meanwhile, Munjal stated that the final models, their positioning and pricing would be detailed later. ''The modalities are being finalised in Japan and in a few weeks, the final details would be available.''

UNI

Business news