Collaboration Of Hero-Honda

Hero-Honda was a joint venture that ruled the Indian market for 26 years, an emotion for many millennials, especially middle-class families. It was unlikely that you wouldn't find Hero-Honda bikes on Indian roads, Hero-Honda was the most successful joint venture in India that was ruling the market for its two-wheeler mode of transportation. There was a time when they had created a 70% monopoly in the Indian market. 

Hero is a leading Indian two-wheeler company founded in 1954 by Brijmohan Lal Munjal and his three brothers. Initially, they were involved in making bicycle parts like forks, handles, etc. Hero's world changed completely when the Punjab government issued a license to manufacture bicycles.

In 1975 it became the largest bicycle company in India, its annual production capacity reached 7500 cycles per year, and it was considered a large-scale unit company. Their record for being the largest bicycle company in the world is also recorded in the Guinness Book of World Records.

Honda is a Japanese bike company founded in 1948 by Soichiro Honda, a mechanical engineer, who quit his job and started his own bike company, Honda Motors.

Soichiro Honda was an inquisitive child right from birth, he was fascinated by the first car he saw in his village. He likes the smell of oil coming out of cars. At a very young age, he left his home and moved to Tokyo to gain some experience as a car mechanic.

Honda Motors is known for its engines; It is one of the largest motorcycle manufacturing companies in the world.

Initially, Hero was planning to enter into a partnership with the French automobile company Peugeot, but unfortunately, the partnership ended without being started.

Collaboration of Hero and Honda:

Munjal was very well versed in the Indian market and knew the needs of every middle-class family. He was a visionary businessman who wanted to launch bikes on Indian roads, but the problem was that he did not have enough technology to manufacture bikes, as initially, they were only a cycle company. They were looking for a partner who could provide them with the technology to build the bike, and that's where Honda Motors came into this partnership.

Hero-Honda Agreement:

• ·      Hero Group will have to pay $500,000 to Honda Motors to bring the technology to India with a royalty of 4 percent.
• ·      Hero and Honda had owned 26-26 percent stakes each and 48% to the retailers and investors.
• ·      They signed a NOC (No Objection Certificate) stating that neither Hero nor Honda can launch their bikes to compete with each other in the future.
• ·      Both the groups will renew the tie-up every 10 years.

Finally, when the deal is done, the miracle begins. In 1985 they launched their first CD 100 bike with the tagline “Fuel it, shut it, forget it”, Salman Khan was doing ads for this bike. In 1995 they sold 20 lakh bikes in a year and became the world’s largest bike-selling company.

After the successful launch of CD 100, they produced many other successful models like Hero Honda CBZ, Hero Honda Splendor, Hero Honda Passion, etc.

Marketing Strategy of Hero-Honda:

The Hero-Honda group had divided the Indian market into three levels/categories of customers:

• 1.     Entry Level customers
• 2.     Luxury Level customers
• 3.     Premium Level customers

Hero-Honda targets entry-level customers, comprising 70% of middle-class families. Their bikes were affordable and fuel-efficient, and their competitors like Yamaha, Suzuki, Bajaj, etc. were inclined toward the urban market. Hero-Honda outperformed its competitors and in the year 1995, they sold 2 million bikes in a year, which was a record in itself.

Day after day, this joint venture was producing excellent results, they were ruling the market, and everything was going beyond expectations but the other side of this collaboration was something else.

We will see in the next blog how this successful collaboration culminates in separation in the year 2010. Don't forget to mention the Hero-Honda bikes used by you in the comment section.

Thank You! ❤