Honda Plans New Scooters Venture

Honda Motor Corporation is set to enter the Indian scooter market by setting up its own independent company instead of through its existing joint ventures. The proposed company would either be a 100 per cent Honda subsidiary or one in which Honda has management control.

However, the modalities of the new company will be worked out only after the Japanese auto giant completes its transaction with the Firodias, its partners in Kinetic Honda, revealed sources within the company.

Honda had earlier decided to sell its 51 per cent equity holding in Kinetic Honda in favour of the Firodias _ who hold 26 per cent stake in the company _ after the two fell out over managerial issues. However, Honda would have continued to supply technology to the company for the existing range of scooter models.

Speaking to Business Standard, a company spokesperson confirmed that Honda Motor has decided to enter the scooter market on its own and outside any joint venture partnership.

He denied earlier media reports that Honda was approaching the Munjals, its partner in Hero Honda, to manufacture and market its new range of scooter models through their 50:50 joint venture.

He added "Hero Honda has already achieved a niche in the motorcycles market and its brand name is integral to bikes in the Indian markets. Honda would not want to dilute that brand equity. Hero Honda is doing extremely well with its limited range of products and we would not want to disturb that equilibrium".

Honda's decision to form its own scooter company in India has been borne out of the fact that the existing joint venture companies (Honda Siel Motors and Shriram Honda) here do not offer manufacturing and distribution facilities for scooters.

Honda Motors had earlier decided to part ways with the Firodias after it expressed disappointment over Kinetic Honda's performance last year. The partnership between the two companies had run into rough weather when the Japanese company expressed unhappiness over a relatively small role it claimed to play despite being a majority equity holder. Under the agreement Kinetic Honda bought components for it's two wheelers from Kinetic Engineering, a Firodia company. Besides, Kinetic Engineering also managed the marketing and distribution network for the Kinetic Honda products.