After a successful run of twenty six years, The Hero Group and Honda Motor, Japan have decided to part ways in their joint venture Hero Honda Motors (HH). The business acumen of the Hero group and technology drive from Honda helped create one of corporate India's most successful JVs. HH is the largest two-wheeler manufacturer in the world for the last eight years. On the face of it the separation has been cordial and following are the key takeways from the press conference:

.. The Hero Group would be acquiring Honda's 26% stake in HH in tranches. The group would use debt to fund the acquisition. Although the stake sale was rumored at USD1bn, the management has withheld details.

.. On the key issue of royalty payment, the management was tight lipped. However it was comforting as they stated that royalty payments would start reducing from Jan'11 onwards. .. Honda would continue to provide technological support to HH till the current agreement ends in June'14. Honda would also support HH in developing three new variants.

.. The biggest gain for HH however would be the opening up of new export markets which had been restricted by the terms of the JV. Currently HH exports only to Sri Lanka, Bangladesh and Columbia. This paves the way for HH's entry to lucrative African market wherein domestic competitor Bajaj Auto (BJAUT) has tasted huge success.

.. Post HH split, Honda should emerge as a stronger player in the domestic market through its 100% subsidiary Honda Motorcycle and Scooter Limited (HMSI). Till date HMSI has been a marginal player in the motorcycle segment limited to sports variants like CB Stunner and CB Twister. Both companies coexisted without trespassing each others territory with HH focussed on the commuter segment while HMSI on the sports segment. Post the separation we expect HMSI to enter the mainstream commuter segment once capacity constraints ease.

.. The current demand for two-wheelers in the domestic market is quite robust. All major OEMs witnessed a capacity crunch during the recently concluded festive season. In this scenario both HH and HMSI have a space to coexist and grow.