Will Hero Group Use Honda's Technology?

By By: Vicky.in

Published: Friday, May 6, 2011, 17:23 [IST]

Hero Honda, the country's largest two-wheeler maker may utilize previous promoter Honda's technology used in its current models for developing future products. Adding, the Hero Group and Honda made a new licensing agreement under which the Indian company will pay its Japanese counterpart 45 billion yen (about Rs 2,450 crore) till the year 2014.

Hero Honda Motors Ltd Chief Financial Officer Ravi Sud said that they have the right to use the (Honda) technology in perpetuity for the existing models as part of the arrangement. As per the agreement, Hero Honda is free to modify or use the platforms of all the existing products, including Splendor, Passion and CBZ to develop new models.

Sud added that earlier, they had to take Honda's permission to make a change even on the design graphics but currently they can change the engine or gearbox or develop on the platforms, if we wish, on our own.

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

For 2011-12 financial year, the company has earmarked up to Rs 800 crore as capital expenditure, mainly for setting up its fourth plant and also for R&D activities. In 2010 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 per cent stake in Hero Honda for Rs 3,841.83 crore.

And the Indian firm can use the Honda brand till the year 2014 however the company has made it clear that it needs to acquire its own identity as soon as possible.

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