Hero Honda Weighs Foray Into Scooters Segment

Motorcycles major Hero Honda is considering entry into scooters in collaboration with partners, Honda Motors, after the Japanese company decided to walk out of Kinetic Honda, their scooter venture with the Firodias of Pune.

Brijmohan Lal Munjal, chairman, Hero group, said: "We are open to manufacturing scooters in the future and are open to having talks with Honda in this regard. However, we have still not received any formal proposal".

However, highly placed sources in Honda said the Japanese major was considering an alliance with Hero Honda to launch its range of scooter models.

The Japanese giant, which has a minority equity stake in Hero Honda, had limited its relationship with the company to motorcycles. However, the Hero group, through some of its other group companies, has been looking at entering into the Indian scooters segment in a limited way. Hero Motors, which has a tie up with Malaguti, is launching a series of scooters on the country.

Honda Motors recently pulled out of its joint venture with the Firodias in which it held a 51 per cent equity stake.

Honda has decided to sell its entire stake for Rs 34.74 crore at Rs 45 per share. Honda, however, agreed that it would continue to provide technical support to the project and the venture would continue to manufacture, market and service the current scooter models.

The partnership between the Honda and the Firodias ran into rough weather as the joint venture agreement requires Kinetic Honda to buy components for its two-wheelers from Kinetic Engineering, a Firodia group company. Besides, Kinetic Engineering also manages the marketing and distribution network for Kinetic Honda products.

Since the supply of components as well as the marketing and distribution of products is handled by the Firodias, the Japanese major is said to be unhappy since it is unable to involve itself directly in the operations of the company despite it being a majority equity holder.