Hero Honda to drive into low-cost mkts with HMC
THE Munjals of Hero Honda, the largest producer of two-wheelers in the world, plan to join hands with their Japanese partner, Honda Motor Company (HMC), to exploit different lowcost markets in Asia, Africa and Latin America. The Munjal family, joint-venture partner with HMC in the flagship, Hero Honda, had asked the Japanese company to develop synergies in different low-cost markets though nothing concrete has come through yet. It had been eyeing different emerging markets where HMC has been operating independently and has not been performing well. The new arrangement is expected to be along the lines of the current spare parts supply arrangement where Hero Honda supplies different low-cost spares to HMC for its worldwide operations. Pawan Munjal, managing director, Hero Honda, told ET, “We had mooted the proposal with HMC, but nothing concrete has emerged so far. There has been no development or positive indication from HMC on that front, though we want to exploit the potential of various emerging markets together.” Hero Honda also wants to tap the export potential with HMC as the domestic market is shrinking, though the company has managed to remain flat in the past six months. The two-wheeler industry declined by 9% to 34,65,327 units from 38,28,021 units last year. Hero Honda managed to buck the trend on the back of 13 new products launched in the past 18-months and was successful in staying out of the negative growth graph. It sold 15.17 lakh units during April and September. The real problem being faced by the company is overcapacity. Due to declining demand, its two plants at Gurgaon and Daruhera in Haryana are running under capacity. Hero Honda has postponed its new five-lakh unit annual capacity plant (further expandable a 10-lakh units) at Haridwar in Uttarakhand to avoid any further losses. The Haridwar facility was to manufacture 100 cc bikes like the Splendor and the Passion, which comprise two-thirds of the total motorcycle market in India. The company’s total capacity was to go up from the current 30 lakh units to 44 lakh units by mid-2007 and 54 lakh units by 2010.