End of Partnership of Honda & Hero |Honda Dissolution

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The initial partnership between Honda and other companies went accordingly but the company was unable to achieve collective goals and ended up in dissolution its partnership.

This dissolved the partnership as the Indian company saw an opportunity to expand its business.

The company came to India to open both branches of automobiles in India.

Honda first approached Bajaj Auto but negotiations failed so they backed out of the deal.

Then, Honda approached Hero Moto Corporation which led to both companies signing the contract in 1984.

Hero Group having 28.6 percentages in the Joint Venture whereas Honda having the rest.

Honda initially started the joint venture to enter a new country which was difficult at that time.

A developing country like India would help Honda to generate increased sales.

The company wanted to grab market-share but they decided to analyse it first because they were unsure.

The business gained market share gradually so they went ahead to stay for the longer term.

Honda had to exit from many countries failing to comply with their Government’s regulation.

After partnering with an Indian company their officials were insecure as they feared compliance issues.

Hero, Honda end 26-year partnership
Hero and Honda dissolution results

We will discuss the cause of dissolution partnership

  1. How Honda achieved its collective milestone with its partner
  2. Reason of dissolution of the partnership
  3. List of the factors affect dissolution
  4. How Honda progressed after the dissolution
  5. Conclusion
  6. FAQs

How Honda achieved its collective milestone with its partner

The company entered into India’s two-wheeler segment with Hero Group in 1984 which was later renewed in 1994.

Honda approached Kinetic Motors for the partnership of scooter deal, as Kinetic was already in the making of electric mopeds.

Honda revamped and created their model of the scooter which was already popular in other countries.

The corporation made a good impact in the Indian market as the consumer already had loyalty towards their native brand Hero.

Hero gained popularity worldwide after working with an International brand Honda.

Honda had the leading-edge technology and Hero had customer base making it a great partnership then.

Their partnership created a strong competition in the Indian market with their successful new launches.

THE launch their first bike CD100 which was based on Honda 4-stroke engine was a huge success.

After Hero Honda break their partnership
10Hero and Honda Separated

The company claims to have fuel efficiency technology Honda had already had created technology which claims to give more mileage. 

Honda had a partnership with Usha International for its car brand.

Honda deal with Usha in the partnership with Usha having 3.16 percentages of the stake in the whole joint ventureHonda and Usha agree with terms and they formed a partnership.

The company was able to comply with the Indian market achieved a fairly good reputation in the market.

The company Plant in Greater Noida Honda launch their first car was a success, it was a Honda city.

‘Honda City’ was based Honda new line-up Honda made decent progress in the car as resulted in them to increase their size of the plant.

infograaphic of factors resulting in dissolution

Reason for Honda dissolute of partnership

A Honda partnership between kinetic did not last long both as Honda was looking for a future in a scooter, but that did not happen as expected.

Honda was not able to grab the Indian market which leads both of the companies dissolute their partnership in 1998.

Kinetic continues making their mopeds whereas Honda created a new lineup of scooter 2001 “Activa” which was hit in the market.

Honda trade logo after dissolution its partnership with Hero
Honda Logo

The process and development between Hero and Honda were going very well they and were increasing their sales every year.

Honda had technology which was also fulfilling the consumer wants soon Hero Honda became an iconic brand.

Where the company sold around millions of bikes in a year which was a huge achievement for them.

All the thing was going pretty well for the company both of the companies were growing very fast.

The company acquired numerous top sales record in India as well as in other countries like Nepal and Sri Lanka.

As the company was growing big the company were having conflicting issues, which resulted in no mutual understanding on a particular decision.

These created a little sense of insecurity between both of the company they were still in the business together.

As Hero Honda becomes the India largest motorcycle company they had to maintain this honour they took drastic steps to expand the business.

Hero logo after rebranding
Hero logo

Factors that led to Honda dissolving the partnership

  • With the company progressing, Hero wanted to invest in independent R&D.
  • Hero wanted this merger to take it to the next growth phase where they planned to focus on new technology vehicles.
  • They desired to invest in the R&D to achieve technological growth but Honda disagreed because they already had their R&D facility.
  • Honda wanted the business to continue as it had been by providing new technology from its main facility.
  • Honda being an International brand made Hero Group insecure of lagging in technology and being dependent on them forever.
  • Hero Honda was looking to expand their business by exporting their bikes to countries other than Nepal, Sri Lanka and Columbia.
  • Honda already had subsidiary dealerships in those countries, so they did not want to sell through Indian JV as it will create competition among itself.

The steps company took after dissolution

In 2010 Hero and Honda dissolute their partnership with Honda by selling their 26 percentages of share to Hero.

Honda established in the Indian market because Honda sold join venture share for 739.97 to Hero in less than half of the market price.

Which was at that time 1518.15 in BSE with an agreement that Honda will provide with technical support till 2014.

The Hero will pay them royalty both of the companies agreed on terms.

The decision of breaking the partnership was unexpected for Honda as Usha was a submissive partner.

When the board of directors changed the President of Usha Internationals the President of Usha decided to dissolute their partnership with Honda.

Honda and Usha agreed with a regulation that Usha International company will sell their 3.16 percentage of the stake of the joint venture to Honda for 180 crores.

This was the end of Honda and Usha International partnership. 

How Honda progressed after the dissolution

As per the ordinance of their dissolute partnership with the contract with their former partner, Honda fulfilled its promises of providing technical facility to Honda till 2014.

Whereas Honda is even in the league after selling their stake in a joint venture they are still in the competition.

The company is even giving competition to its former partner also in the motorcycle industry.

Hero R&d Facility
Hero R&D facility

Whereas Hero sold most bikes annually in India, but Honda has the most number of scooter sales in India.

Honda has facilities which can give them technologies to raise their product so that grab customer attention.

In Usha International case Honda had to pay 180 crores to Usha International for 3.16 per cent of stake.

Honda is expecting to launch their new car series and some new line up which is going to be powered by electricity.

Conclusion

The partnerships were dissolution because of both the partners could not agree to a mutual decision.

There was various factor resulted in the dissolution of the partnership major being Honda not supporting Hero to expand its business through establishing R&D facility and start operation of export to different countries.

Honda and Usha partnership dissolution because of the new chairman was of the Usha was not agreeing on certain deals which led to dissolution.

FAQs

1.After dissolution who got the ownership of their previous product?

Hero got the ownership of the previous product as well as the assistance of Honda technical team

2.Does still Honda provide the facility to Hero?

Honda does provide the facility to Heroes but not as much as they use to in 2014 after the expiration of the agreement they resolve internal matters among themselves.

3.What happened to Kinetic moped after dissolution?

After dissolution company run its operation independently then Mahindra bought few percentages of share and later in years end up acquiring the whole kinetic company

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