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Hero group renews joint venture pact with Honda

New Delhi, March 11: Hero Honda, the country’s largest motorbike maker, today said the joint venture pact between Honda Motor Company and the Hero group will be renewed for another 10 years.

The current agreement between the Japanese firm and the Munjals-controlled Hero group — each holding 26 per cent stake in the joint venture — was scheduled to expire in 2004. The remaining stake is in the hands of financial institutions and the public.

The motorbike firm said to sustain growth it would launch at least four new models, perhaps five, in the next financial year 2003-04 (April-March).

“Honda will continue to provide full technical support to Hero Honda and the two Indian subsidiaries will together aim to capture 50 per cent of the local two-wheeler market,” said M. Sudo, Honda’s south-west Asia general manager.

Honda’s research and development unit would continue to provide technology to Hero Honda as well as the Japanese major owned Honda Motorcycle and Scooter India Pvt Ltd (HMSI) producing scooters, he added.

The Honda scooter manufacturing unit was set up after the agreement between Kinetic Motor Company and Honda to manufacture scooters was snapped.

Sudo said HMSI will have the option to make motorcycles after June 2004 and Hero Honda Motors will have the option to make scooters. “A joint model introduction plan for the two companies had already been decided.”

Currently, the two units together hold a 36.3 per cent share of the two-wheeler market which includes scooters, mopeds and motorcycles. Hero Honda alone holds a huge 45.2 per cent share in the motorcycle market.

For the nine-month period ended December 2002, Hero Honda’s sales jumped 24.9 per cent to around 12.8 lakh bikes.

But the firm is battling second-ranked Bajaj Auto built on the Kawasaki technology which grew by 39.4 per cent and the 78.6 per cent growth registered by number three TVS Motor Co.

Pawan Munjal, managing director of Hero Honda Motors Ltd, said the firm is in the process of expanding the combined capacity of its two plants at Ballabhgarh and Dharuhera in Haryana to 2.2 million units from 2 million now. This would take care of the production needs for the next financial year.

Apart from this, the company hopes to complete a feasibility study for setting up a third plant within six months, Munjal said. “We have got a Honda engineering team which is helping us to increase capacity at the two plants with the same investment and manpower in the next few months.”

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