Some overly excited blogs may report that Honda is exiting the growth market India. Careful. Indeed, Reuters reports that “Hero Investments has agreed to buy Honda Motors Ltd’s 26 percent stake in Hero Honda Motors for around $851 million in a deal that will see the Japanese automaker exit its joint venture in India after more than 26 years.” So are they outta there?
No, they are not. Hero Honda Motors is Honda’s two-wheeler joint venture in India. Honda cars are built and sold through the Honda Siel joint venture, the 7th largest car producer in India (which is not much.)
Honda is not even giving up the lucrative Indian 2 wheeler market. Honda has their own 2-wheeler company on the subcontinent, Honda Motorcycle & Scooter India. They will invest $110 million into that. They have the money, Honda’s 26 percent share was sold for $851 million. The Honda-less Hero Honda will continue making Honda bikes under license. Analysts think the license fees will be hefty, because Honda’s share was sold at a 50 percent discount to Tuesday’s trading price.
Let me get this straight: Honda is turning its joint venture partner into a licensed manufacturer/seller, they’ll compete against their former jont venture partner with a wholly owned 2-wheel outfit while charging hefty license fees to build other Honda 2-wheelers, and the former joint venture partner paid them to do this?
Honda’s negotiators should be working for the UN. Unless there are some details, like joint venture provisions, and differences in the types of 2-wheelers sold by the two entities, that spelled all this out.