Hero MotoCorp to take a 49.2% stake in Erik Buell Racing

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 in 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, to build motorcycles. These motorcycles will be sold in India and other markets across the globe. 

 Source Reuters