Home Automobile Honda Joint Venture in India | Hero & Honda Partnership

Honda Joint Venture in India | Hero & Honda Partnership

Honda has been the most important part of the Indian automobile industry by introducing innovative technology with its futuristic designs. This made Honda to easily form a joint venture in India.

Therefore, new cutting-edge technologies helped in increasing their market share by attracting the majority of India’s demographic, youth.

Honda has been one of the largest sellers of two-wheelers in India since the past decade.

Also, it has a reputation in the Indian market for manufacturing durable and powerful car engines.

Honda plant in India
Honda plant

Further, we will learn about

  1. Beginning of Joint venture in India
  2. Establishment of plants after the joint venture
  3. Comparison studies with other companies
  4. Companies plans for future
  5. Conclusion
  6. FAQs

Beginning of Joint venture in India

Honda joint venture of different companies

After succeeding in the automobile industry in Eastern Asia since 1949, Honda started to expand its business by registering as a corporation in different parts of the world resulting in huge growth in the vehicle segment.

Eventually, Honda struggled to establish their corporation in other countries as they were unable to comply with the rules and regulation of the country.

Honda thereafter took up separate methods of operation to expand worldwide.

However, India proved to be a difficult destination for Honda to enter before liberalisation in 1991.

Hence, the company opted to proceed with a joint venture plan.

Initially, the company failed to reach an agreement with Bajaj Auto Ltd thereafter concluding a deal with the Hero Group.

Consequently, ‘Hero Honda’ was established in 1984 henceforth achieving huge milestones jointly.

After the partnership between the two companies, it focused on selling two-wheeler bikes in the Indian automobile market, therefore, making Hero entitled to 28.6 per cent holdings.

Hero Honda joint venture and launched bike
Hero Honda Bike

Honda approached electric scooter

Honda’s production of motorcycles was divided into two segments, firstly, the joint venture with Hero for scooters and secondly, the partnership between the Kinetic Engineering Ltd (Kinetic) which were known as Luna of mopeds.

Following the partnership between Kinetic Engineering Ltd, further Honda came to be known as Kinetic Honda Motors Limited (Kinetic Honda).

The company also manufactured scooters due to its increasing popularity.

Consequently, in 1995 the company partnered with Usha International of Siddharth Shriram Group for a joint venture in India. Later, the contract signed gave rise to Honda Siel Cars India Ltd.

Lastly, Honda bought the remaining 3.16 per cent from the joint venture at a price of ₹1.8 billion and becoming a subsidiary of Honda.

Hero Honda Joint Ventured Logo
Hero and Honda Joint Ventured Logo

Establishment of Plants

Hence, they set-up a plant in Greater Noida, Delhi with a budget of ₹4.5 billion and which is now spread across 150 acres.

The factory started in 1997, had a capacity of making 30,000 cars in a year which later increased to 50,000 with dual shifts.

Likewise, after experiencing rapid growth in sales, they had to ramp-up their production capacity to 100,000 and thereby increasing the plant size to 33 acres.

Subsequently, to meet demand they had to construct a new plant in Tapukara in Alwar district, Rajasthan covering 450 acres with a budget of 3526 crores.

Moreover, the new plant facilitated the manufacturing of both cars and motorcycle, making it further easy to transport to different locations.

Honda plant in Tapukara in Alwar District Rajasthan
Honda Plant in Tapukara in Alwar district, Rajasthan, India

Afterwards, they launched their new 2-stroke engine scooter named Kinetic Activa based on Honda technology which became an enormous hit in the market.

Honda growth with its partners

Moreover, Hero Honda then launched its first motorcycle CD-100 which was a fuel-efficient 4-stroke engine.

As a result of being economical for the Indians, they sold 1 lac of this model in 1985.

On the other hand, the company also launched its first car, Honda City in 1998.

Initially, Honda City was launched as a 3-door hatchback in 1994 which was later modified to a 4-door sub-coupe sedan.

There are other cars of Honda which were sold in India, but they did not sell those cars through the Indian industry because of the cost of manufacturing.

The car was cheaper to import than to manufacture it in Indian facilities.

Hence the company was unsure about the reaction of the people towards their cars so the company decided to import the cars from Japan.

Subsequently, Honda established its dealerships across India in major cities to reach to customers seeing progressive results in revenue.

As a result, they now have 281 dealerships around the country & 3 dealerships in the Union Territories.             

New Honda plant in Vithalapur, Ahemdabad
Honda plant in Vithalapur, Ahemdabad

Comparison studies with other companies                                          

Hero and Honda

CategoryHeroHonda
Founded in (Year) 1984 1949
Founded by whom Brijmohan Lall Munjal Soichiro Honda
OriginDharuhera, Haryana, IndiaHamamatsu, Shizuoka, Japan
Number of plants (India) 5 4
Products MotorcycleAutomobiles, Motorcycle,
Water mobiles, Jets, Aero-engine
Reached (Countries) 27 countries 150 countries

Future planning of Honda in India

Meanwhile, Honda managed to be among the largest sellers even after ending their partnership with Hero, Kinetic and Usha.

However, the company has already made plans of vehicles being suitable for the Indian market along with the focus on the two-wheelers segment.

In addition to Activa, their top-seller for the last 5 years, they have prepared other models of the scooter.

The company has been further looking to enter into making electric cars after witnessing their competitors being aggressive in this segment.

On the other hand, the Government of India has already issued guidelines to have electric bikes under 150cc by 2025.

Honda being a Multi-National Corporation further look to export more vehicles from India which could be sold at lesser prices in foreign countries.

Conclusion

Honda joint venture in India was a collective growth for the Honda company and for the Indian company.

The Joint venture of the in India companies helped the Indian companies to see the diverse market.

Due to Joint Venture Honda was able established its plants and business in India.

FAQs

1.Which company’s engine were used in Hero Honda Bikes?

All the engines used in Hero Honda bikes were supplied by Honda.

2.Is Honda is making new plant?

Yes, Honda is going to set up a new plant in India which is now in approval phase in Japan.

3.What is next step of Honda?

The company is looking to create more economical cars which are fuel-efficient as well as environment friendly.

4.Is Honda making electric cars?

Yes, the company launched Honda-E in 2020.

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Sohail Ahmed
Pursuing B.com|Stock marketing| Exploring possibilities in life
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