Honda's Foray into the Mass Market in India

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Case Details:

Case Code : MKTG306
Case Length :13 Pages
Period : 2012
Pub Date : 2013
Teaching Note : Available
Organization :Honda Motorcycle and Scooter India Ltd.
Industry :Two wheeler market
Countries :India

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Honda in India

In 1984, Honda Motor Company Ltd. (HMCL) entered the Indian two-wheeler market through a joint venture with Kinetic Engineering Limited (KEL) . KEL launched a successful scooter model Kinetic Honda. It introduced modern features in its scooters like variomatric gearless transmission , self start, and other user friendly features. The same year, HMCL entered into another joint venture with the India-based Hero Group and formed HeroHonda Motors Ltd. (HeroHonda) with a 26% equity stake in the joint venture.

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Over the years, the relationship between the Hero Group and HMCL strengthened with the increased sales of motorcycles. In 1993, HMCL increased its stake in the HeroHonda joint venture to 50.92%.

In the early 1990s, its success in scooters led to KEL deciding to enter into the motorcycle business. But KEL was not allowed to do so as HMCL already had a joint venture with the Hero Group. In 1998, HMCL divested itself of its equity stake in KEL.

Upon termination of the joint venture between Honda and KEL, HMCL established HMSI in 1998. HMSI started manufacturing Activa scooters in 1999. Spurred by the overwhelming success of its scooters, HMSI started manufacturing a 150cc executive motorcycle, the Unicorn , in 2004. Having only limited products under its portfolio, HMSI had minimal influence on the sales of HeroHonda. But the foray of HMSI into motorcycles limited the market for HeroHonda. As Indians were accepting HMSI products well, HMSI entered into the 125cc executive motorcycle segment with the Shine in 2006 to attract more customers. It launched more executive motorcycle models like the CB Twister . Eventually, it became a direct competitor to HeroHonda.

HMSI’s increased product portfolio increased the level of discord between HeroHonda and HMSI. The Hero Group’s global expansion plans were also hampered because of its agreement with Honda. The joint venture between the Hero Group and HMCL broke up in 2011. On the breakup of the joint venture, Vaishali Jajoo, auto analyst at Angel Broking , said, “Honda is looking at the bigger picture here by breaking up the JV, if that happens and is eying the huge potential of the Indian two-wheeler industry."

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