History of Hero Honda and the story of their separation

There was a time when having a scooter in a middle class family used to make one feel proud and at the same time it had also become a necessity in every household. But by the time of 90s, bikes gradually started replacing scooters and the name of a fast emerging motorcycle company with its slogan of 'Desh ki Dhadkan' became a household name. And that name was Hero Honda company. This journey of the company from its slogan 'Desh ki Dhadkan' to 'Dhak Dhak Go' was very pleasant, but in the year 2010, when the Indian Government allowed foreign companies to invest up to 70 percent in India, many Foreign companies came to India and many foreign companies which had already set up their business in India in collaboration with Indian companies ended their agreement and started doing independent business. The breaking of the 26-year agreement between India's Hero Group and Japanese company Honda Motors was the biggest example of this, which created a stir in the market. However, the other reasons behind the separation of both the companies were something else, about which we are going to tell you today.

The Honda Company was separated from Hero Honda and the Hero Company became 'Hero MotoCorp'. In no time, HeroCorp's new theme "Hum Main Hai Hero" from "Dhak, Dhak Go" started echoing everywhere and the news was confirmed that the two companies have parted ways. Today both the companies have separate factories and both are manufacturing their own bikes and selling them separately in the market. Before starting the story of the separation of Honda and Hero MotoCorp, let us also know in short that when and why did these two companies merge? And what was the agreement between the two?

Hero-Honda Agreement

This story dates back to the time when the Hero company was said to be one of the world's largest cycle manufacturing companies, as well as its name was being counted among the world's leading companies. With the changing times, the owners of the Hero company noticed that the motorcycle business is emerging very fast in the foreign market, which can have a strong scope in India, because then there were only two options in the name of two wheeler, scooter and bike in India. . The owners of the company had understood this very well that there would not be a better time than this to launch a motorcycle in the Indian market, but the biggest problem in this was the technology of making engines for bikes, without which manufacturing a motorcycle was a distant dream for Hero.

Now there was only one way left for Hero to take it, and that was to collaborate with a foreign company that had the experience of manufacturing bikes or the ability to make engines. This was the period when no foreign company could invest directly in India, but the government had given exemption that any Indian company can tie up with any foreign company and do business in India. After a lot of thought, Brajmohan Lal Munjal, one of the owners of the Hero Group, sent his proposal to the Japanese company Honda, which was considered the world's largest motorcycle company at that time.

Brajmohan Lal Munjal

On the other hand, even in the eyes of Honda company, a big market like India was no less than a hen laying golden eggs. Since at that time no foreign company could directly start its business in India, in such a situation, Honda accepted this proposal because it knew very well that only through a big company like Hero, it can be shadowed in the Indian market. Thus in the year 1984, both the companies i.e. Hero and Honda joined hands. After this, an agreement was made that Hero would make the body for the bike and Honda would supply the engine for them. Along with this, both the companies also signed an NOC, according to which they will never launch their product in front of each other in future.

What was it then, without any delay Hero Honda's first plant was set up in Haryana and in the year 1985 also launched its first bike CD 100 in the market. Seeing this form of motorcycle as a two wheeler, it became popular all over India, along with the name of Hero Honda company also got on everyone's tongue. The second biggest reasons for this popularity were the high mileage of this bike in comparison to scooters as well as its price, which was quite affordable for the middle class. ‘Fill it, Shut it, Forget it’ i.e. ‘Fill petrol in the bike tank, stop it and forget it.’ This tagline of the company was also very much liked by the people, in which the message was clear that its mileage is tremendous.

Beginning of discord

Hero Honda's business was doing well in the Indian market but the situation inside the company was not as good as it appeared from outside. In fact, there was no problem in the beginning with Hero Honda's business in the Indian market, but the mess started when it came to selling Hero Honda's bikes in other big countries. Because Honda was already selling its bikes in developing countries like America and Russia and its market should not deteriorate there, it flatly refused to give permission to Hero Honda to sell its bikes in these countries.

Honda wanted Hero Honda to be limited to only neighbouring countries like Nepal, Bhutan and Bangladesh apart from India. Here the Hero Company, whose name was recorded in the Guinness Book of World Records as a bicycle manufacturer, wanted to create the same special position for its bikes in the international market, but because of Honda, its speed seemed to have been braked. As a result, the relations between the two companies started deteriorating. Since according to the agreement till now the Hero company used to make only the body of the bike, so it could not be separated even if it wanted to, because till now they were completely dependent on Honda for the engine.

Soichiro Honda

Hero company had now understood that if it has to break away from Honda, then it will have to manufacture its own engine. Hero decided that he would spend his profits in making the engine and then what was to happen happened, Hero's decision went to the ire of Honda and the estrangement between the two increased further. However, in the year 2004, Hero Group and Honda Company extended their agreement for ten years. Under which it was decided that Honda will continue to provide the engine as before. This agreement was to be renewed in the year 2014, but the estrangement had increased so much that before that both the companies decided to separate and in December 2010, the Munjal family bought the entire 26 percent stake of Honda which was worth Rs 3,841.83 crore. Had done, announced to buy it. In an interview during the same period, Hero Honda's MD and CEO Pawan Munjal said, "This is the most important announcement in the last 25 years.The Board of Directors has approved the MoU between Hero Honda and Honda. Hero Honda will continue with the production of existing models while introducing new models. However, all future products will be launched under the new licensing agreement between the Hero group and Honda." In the interview, the company also said that with the separation of its promoters, the Hero Honda brand name will also change in the coming times.

Other major reasons for separation

In fact, the biggest reason for this difference and separation was that on the one hand the Hero Group wanted that under its agreement, the ban on the sale of Hero Honda bikes in other big countries should be abolished, but on the other hand, the Honda company, in exchange for this permission, She was demanding more royalty. Not only this, Honda's attempt to enter the two-wheeler market in 2000 through its Honda Motorcycle and Scooter India also became a major reason for the separation between the two companies. In fact, in the NOC that was signed during the collaboration, it was clearly stated that both the companies would never launch their respective bikes in front of each other in India, but Honda ignored that agreement and set up a separate company in the year 1999. Honda motorcycle and scooter india pvt ltd. Got registered in the name of and launched its bikes in the market in competition of Hero Honda, that too at almost the same prices. The result was that Hero Honda's customers kept getting divided and Hero Group had to suffer losses which was bound to happen naturally. A few years later, Honda set foot in the scooter segment by launching the Activa scooty. While Hero was still limited to its share of Hero Honda's profits, Honda was getting two-way profits, separate from Hero Honda, and separate from its separate company.

It is obvious that these reasons were enough for the Hero company to part ways with Honda. After which, by the year 2010, both the companies got separated. Though Hero had the rights to use the Honda name till 2014, but Hero itself was a big name in itself, so it did not consider it necessary to resort to the Honda name. After separating from the Japanese company Honda, the Hero Group had already made all its preparations. Just waiting for the approval of the shareholders of the company, after which the company changed its name to Hero MotoCorp.

After this separation on 16 December 2010, Hero Honda Company had 26 – 26% shares of both companies, out of which Honda decided to sell its 26% shares to Hero and Hero Company's promoter Brajmohan Lal Munjal got $ 1.2 billion. I bought these shares and started my new company under the name of Hero MotoCorp. In one of his interviews given during that time, Brajmohan Munjal, chairman of Hero MotoCorp, had told that, “The separation that happened between us and Honda was a good sign for us. Apart from this, it is the beginning of a new era for us. He told that Hero will now show its strength by being independent all over the world and will establish new dimensions of development.”

Funny thing is that when the Hero and Honda companies separated from each other, people started feeling that without the support of Honda, the Hero company would not be able to survive in the market for long, but today the name of Hero MotoCorp is the world's largest motorcycle maker. Has become one of the companies which is selling its bikes in about 40 countries.