Dec 19, 2010

4 Hero & Honda Officially Split Apart

26 years of a successful partnership officially ends.. Honda name to be evenually dropped.. What else does the divorce brings?

Not very long ago I had heard overheard a conversation that the word "Hero Honda" had found its way into a couple of contemporary folk songs of Rajasthan (a state which is dominated by Hero Honda models). I have not heard those songs myself but I totally understand the impact of models like Splendor/Passion have had in the life of middle class Indians.

On 16'th Dec 2010, Hero and Honda officially announced that both are finally going separate ways. So what does it mean for both the manufacturers and also for the middle class Indians who have been brought up on a staple diet of Splendor/Passions?

The Hero group will be buying the 26% stake that Honda currently holds in the Joint venture. Also a new licensing pact has been signed between the two, from which the following has been understood..

1. Honda name to be dropped from "Hero Honda" by 2014

"Its the Honda in it that makes it a Hero", goes a print ad from the mid 1980's, when Hero Honda kickstarted its Indian foray.

But after the split, the Honda name will have to be eventually dropped. How will Hero go about doing that?

The Hero group plans to go for an image/brand makeover which will take place over a period of 3 years.

Probably a new brand name / new logo will appear. Hero has asked its as agency JWT to start working on solo brand strategy.

I got a suggestion, how about "Munjal Motorcycles"..??

There is also an idea to leverage the brand names of its best sellers the Splendor & Passion.

"The focus will be more on promoting individual brands such as Passion and Splendor as these brands have built themselves up in customers’ minds over a period of time," a JWT official said.

"Hero Honda said there will be a 'smooth transition' over a period to June 2014 by when the company’s name is expected to change". Source: Economictimes

2. Current models to continue, Honda to provide a couple of new models..

Honda has agreed not to pull in the plug and will be providing probably 3 more new models. Also the current products from the Hero Honda stables will continue to be on sale.

3. Hero can search for technical partner or develop its own R&D capabilities

Honda has given the green signal for Hero that it can start the search for a new tech partner or develop its own R&D capabilities

4. Hero Honda can explore foreign markets for exports

Honda has also given the green signal for Hero that it can start exporting its products to countries where earlier it could not export due to the presence of Honda.

5. Royalty payments to Honda expected to come down..

"The royalty level will remain at the current level. But it will start coming down from January next year. Very soon all the current products we have in our portfolio will not have any royalty". - Mr. Pawan Munjal

"Once we develop our own capability, we are obviously not paying for the models that we were earlier importing." - Mr. Pawan Munjal

My Take:

Looks like Hero Honda has a strategy at place for gradually transforming its brand identity from "Hero Honda" to something else.

Also it looks like to save on the royalty payments, Hero is looking at replacing the technology/engines of its models with ones developed/bought from some where else other than Honda.

So far, the Honda derived products have build itself a credibility of being very reliable which in turn has rubbed off on its parent "Hero Honda" brand. So even without the Honda brand, the good reputation and good will so far build by its models will not diminish all of a sudden.

But what will be interesting would be to see whether the Hero group is able to maintain the same level of quality on its products once Honda is totally out of the picture. Also with motorycling evolving in India, whether the Hero group would be able to keep pace with the change.

If not, it could well be that maybe over maybe a decade, the word "Hero Honda" could be relegated as a legend in Rajasthani folklore.

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This is to remind that the Views or Opinions in the blog are entirely mine unless explicitly stated. The Views and Opinions published in this blog should in no way be related to any other person or organization associated -- directly or indirectly -- with me.


Gautam said...

"Hero has asked its agency to start solo branding...."
Means we are going to see flood of dumb hero ads pouring out of all the media next year!
First Hero should stop making of childish ads & kick into ass of its ad agency who made it. The quality of Hero ads are too poor when compared to Bajaj Pulsar mania or even TVS Apache ads.
Mr. Munjal, a humble request: Ur customer do NOT buy HH due to its ads, they buy it due to its quality. Stop un necessary expenses on ads and sport events, and use these money for setting up ur own R&D. It need u most right now...
Because an Indian dont want to see another Kinetic!

melville said...

"Munjal Motorcycles"..?? ROFL...even my electrician might hesitate to buy one!

Deepak said...

Goog riddance. Hero will now pay dearly for limiting its R&D to just churning out multi colored stickers.

Once people starts to know that the bikes from Hero won't have Honda tech in it anymore, the sales numbeers will suffer badly.

Hero Honda #@$k #@$k GO!!!!

praveen said...

may be they were departed, but Honda will source technical assistance to hero upto 2014 & will survive with its base models like splendor & passion. In the meantime Hero have to build its own R&D to research and make its own technical resource like Bajaj & Tvs had done.

Kinetic didn't survived because they dont have the market presence for there models except kinetic honda scooter. But hero already proved that they are No 1 in the market in terms of sales, manufacturing & created strong goodwill & presence for past 10 years. By the way Kinetic was takeover by mahindra also an Indian MNC, so we dont have to worry about this thing, & ur right atleast now hero have to wakeup to stop making such a funny ads and need to concentrate on technical resource.

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