It's been over a year since Hero MotoCorp parted ways with Honda. As the world's largest two-wheeler maker scripts its own story, its MD & CEO, Mr Pawan Munjal, tells Business Line how multiple technical alliances will help it rapidly cover the time it lost out in developing proprietary technology.
With plans to look into new segments and spread beyond two-wheelers, this will be critical to its global plans and help meet a $10-billion turnover target over the next 5-6 years.
Your first technical tie-up is with Erik Buell Racing (EBR). Where does it figure in your game plan?
Though EBR does high-end bikes and has technology for high-performance, racing bikes, this can be adapted for mid-segment bikes beyond 200 cc. I feel they have lots of new ideas, I think I can talk to them about even 100 cc engines over time.
Some of our current bikes with EBR technology will be launched by the next fiscal. These will probably be a mix with Honda technology as it's too short a time to completely shift. We're also working on completely new platforms with EBR, which would be launched by 2013-14.
Ideally, how many tie-ups would you look at?
We will not restrict ourselves to a single technology/ arrangement, but have multiple tie-ups with experts. To my mind, 3-4 (tie-ups) is a good number.
With EBR we're finding everything for a certain segment of bikes, with somebody else (AVL, Ricardo) we're working on only engines. For styling, we have a fair amount of expertise within, yet we will be bringing in more resources. We will hire expats, since our customer is global, we will have to become a multinational as well.
We're also working on our own smaller engines in our R&D, with the support of technology partners, in the 100-125cc range.
Will Hero Moto venture beyond two-wheelers?
There definitely is a vision to do that, but right now we're focussing our energies on two-wheelers. There is a plan to diversify into other segments, maybe cars or commercial vehicles — though that's a more mid and long-term strategy.
At an about 50 per cent discount, Hero struck a strong bargain in buying out Honda's stake.
We believe we got a very good deal in terms of the valuation of the shares that we got back, the transition arrangement and our signing of two new licences.
The arrangement is that we have to make a certain amount of payments to Honda over three years. It's not royalty really, but more a lump-sum payment that we agreed with them to retain the right to manufacture the models here. That will start happening soon.
What gains do you think Honda walked away with?
Both partners benefitted from the joint venture. Before we started around 1985, the Honda brand was relatively unknown. After that, Honda cars came in and then power products. Also, they gained market experience.
I would think suppliers are very important. Going forward there would be synergies in various areas, which if they desire and works out well for both companies and the suppliers, there can be some arrangements.
Does Hero have Ducati in sight?
There are a few bankers who have been meeting two-wheeler makers like us for Ducati. Many people these days are approaching us since they know we're in the market looking for tie-ups. We're open to meeting as many people as is needed. There's no situation where we're in an advanced state of discussion with any one manufacturer or a banker. I can't really say if we're interested in the company or not.
When will the shift to brand Hero be complete for products?
Complete rebranding should take 6 to 12 months. The export markets are very important to us now, but we can't produce two sets of products. They are little different from India, so the brand push needs new thinking. We want the brand change to be smooth.