Hero Honda may continue using Honda's technology

The country's largest two-wheeler maker Hero Honda may utilise erstwhile promoter Honda's technology used in its current models for developing future products.

After deciding to part ways on their 26-year-old joint venture, the Hero Group and Honda signed a new licensing agreement under which the Indian firm will pay its Japanese counterpart about Rs 2,450 crore (45 billion yen) till 2014.

"We have the right to use the (Honda) technology in perpetuity for the existing models as part of the arrangement," Hero Honda Motors Chief Financial Officer Ravi Sud told PTI.

Under the agreement, Hero Honda is free to modify or use the platforms of all the existing products, including Splendor, Passion, CBZ to develop new models, he said.

"Earlier, we had to take Honda's permission to make a change even on the design graphics but now we can change the engine or gearbox or develop on the platforms, if we wish, on our own," Sud said.

Asked if Hero Honda will use the existing technology for developing future products, he said: "Well, we have the rights and we would like to use it."

Apart from considering using Honda's technology, the company is also building up its own R&D capabilities, both manpower and logistics.

"New product development will be one focus area as we move ahead in order to expand our customer base. We remain prepared to meet the market demand for our products," Munjal said while declaring its financial results yesterday.

The company has earmarked up to Rs 800 crore as capital expenditure for 2011-12 financial year, mainly for setting up its fourth plant and also for R&D activities.

Last December, the Hero Group and Honda had agreed to end their 26-year-old relationship, with the Indian partner agreeing to buy out the latter's 26% stake in Hero Honda for Rs 3,841.83 crore.

Post the break-up of the partnership, the Hero Group will also be renaming Hero Honda and the Honda brand is to be dropped.

As per their agreement, the Indian firm can use the Honda brand till 2014 but the company has made it clear that it wants to acquire its own identity as soon as possible.

Hero Honda has hired firms, Wolff Ollins and Law & Kenneth, to advise on the new branding and communication.