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Indian two-wheeler major Hero MotoCorp has bought 49.2 percent equity in US based superbike company Erik Buell Racing (EBR) for $ 25 million.

The first tranche of $ 15 million was invested by Hero MotoCorp Ltd. (HMCL) early Saturday morning (Indian time) while the remaining amount of $ 10 million will be invested in the next nine months. The remaining share of 50.8 percent would be held by Erik Buell and his wife.

According to Pawan Munjal, the partnership is a part of the HMCL’s strategy to globalize the Hero brand and the two brands will be together promoting and selling EBR as well as Hero Hero bikes in African, European and North American markets.

Acknowledging the fact that markets like America are dominated by bikes whose engines are much bigger than what Hero offers on their bikes, Munjal said that he believed that “smaller engines can be sold in the America.”

Meanwhile, there will be no organizational changes at EBR and Erik Buell will continue to be its chairman and CEO. However, HMCL will have two directors and one observer on the EBR board.

HMCL and EBR had formed an alliance last year, under which the Indian two-wheeler marque receives support in terms of latest technology and design to develop future models.

Munjal further said that the company is has increased its export target to 350,000 units in 2013-14 from around 200,000 units in 2012-13. The company is aiming to reach the objective of 10 percent of its total volumes from international business in the next four to five years.

HMCL had in May launched products in in Guatemala, El Salvador and Honduras. It currently exports to several countries, including Colombia, Sri Lanka, Bangladesh and Nepal.


REVAMPED PRODUCTS TO BE LAUNCHED AROUND DIWALI


Hero would launch its complete range of overhauled products around Diwali this year followed by the launch of a complete new bike in 2014.

According to Hero MotoCorp Ltd. (HMCL), the modifications to its existing range of 19 bikes and scooters will be done in partnership with US based superbike company Erik Buell Racing (EBR) whose 49.2 percent stake was
bought by Hero early Saturday.

Munjal said that all new bikes would be launched starting from 2014 and will be based on the new ‘greenfield platform’.

Speaking on the sharing of technology and research and designing with EBR, Munjal said that Hero would not leapfrog into the super bike category and the upgradation will be gradual.

However, he added that the entry of EBR bikes in India was “definitely possible but not immediate.”

HMCL’s fourth plant in Neemrana will start production in the fourth quarter of fiscal year 2014 while the company is awaiting the allotment of the second portion of land in Gujarat.

[JayPrashanth]

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The world's largest two wheeler maker by volumes, Hero MotoCorp, has announced that it will buy a 49.2% stake in Erik Buell Racing (EBR), a company founded and owned by Erik Buell, a former engineer at Harley Davidson. Hero MotoCorp's US subsidiary will take a stake in EBR. The remaining 50.8% stake will be held by Mr Buell and his wife.



EBR's 49.2% stake is being sold to Hero MotoCorp for a sum of 25 million US dollars. Of this, Hero's US subsidiary has already paid 15 million USD and the rest of the amount will be paid to Erik Buell Racing in nine months from now. The remaining 10 million USD will be paid by Hero MotoCorp's US subsidiary in a single shot.

Hero MotoCorp is already in a technology sourcing partnership with Erik Buell Racing, in an agreement that was signed last year. Erik Buell Racing is said to be developing powerful, high end motorcycles for Hero MotoCorp. The first of such high performance motorcycles will be launched over the next few years.

Apart from Erik Buell Racing, Hero MotoCorp has technology sourcing tie ups with AVL Austria and Riccardo. Also, the Indian two wheeler giant is investing more on its domestic R&D operation as it gears up to take on the mounting competition from the likes of Honda and Bajaj Auto.

The first crop of Hero MotoCorp motorcycles based on an all new platform (minus technology sourced from Honda) will hit the Indian market by 2014. Hero is also looking to aggressively scale up its footprint across the world, especially in emerging markets of Africa and South America.

Hero MotoCorp wants its next big wave of growth to come from exports, an area that it hasn't traditionally been strong in, due to the non-compete agreement with Honda during the times when Hero was in the Hero Honda joint venture. With Hero and Honda now going separate ways in India, the Indian two wheeler giant has the opportunity for exploring unexplored markets.

Recently, Hero MotoCorp launched its motorcycle range in Latin American countries. In the coming years, the two wheeler company hopes to set up assembly operations in Latin America and Africa, a move that is expected to give it attractive cost benefits and pricing power.

Hero MotoCorp isn't the only Indian two wheeler maker to take a stake in a foreign motorcycle maker. Bajaj Auto has a stake of over 49% in Austrian motorcycle maker KTM. The Bajaj-KTM partnership has seen the launch of interesting motorcycles such as the Duke 200 and 390 in India. Technology from KTM has filtered onto the Bajaj Pulsar range through the 200 NS model.

TVS Motors is also in an alliance with BMW Motorrad, to jointly develop high performance motorcycles that are affordable too. Like the Bajaj-KTM duo, BMW and TVS Motors have plans of leveraging the low cost-high quality manufacturing strength of India. These motorcycles will be sold in India and other markets across the globe.

Source Reuters