Will Hero MotoCorp’s Eric Buell Alliance Be As Good As The Honda One?

A recently announced alliance saw Hero MotoCorp (HMCL), the largest two-wheeler company in India and a mass-producer of affordable motorcycles, joining hands with Erik Buell Racing (EBR), the producer of superbikes. As polarised as this sounds, we will have to wait to see how well this partnership goes.

Alliances with foreign companies for technological expertise are not new for the Indian two-wheeler industry. TVS-Suzuki, Kinetic-Honda, Escorts-Yamaha and Bajaj-Kawasaki have been popular names at various points in the history of two-wheelers in India. While many have failed, many have also benefited in their unique way.

In HMCL’s case, since the end of its partnership with Honda (Honda took off as an individual entity thereafter), HMCL has been actively looking for a technological alliance. It signed a technology deal with EBR in February 2012, and recently went on to purchase a 49% stake in the company.

HMCL has agreed to pay USD 25 million for this deal, whereby it has invested its first tranche of USD 15 million on June 28, 2013. The second tranche of USD 10 million would be invested in the next 9 months.

EBR is a specialist involved in the manufacture of customised high-performance Harley Davidson engine superbikes. With top-notch engineering, innovative chassis and suspension systems, ERB has been a pioneer at technological advancement.

HMCL is currently running its product portfolio on Honda’s engines. Honda’s technology is available to HMCL only till 2014. Considering HMCL’s aim of becoming a global player, and being capable of building vehicles with a competitive edge, there is no doubting the requirement of a player like EBR.

While EBR is undoubtedly advanced on the technology front, one needs to keep in mind the lead time that is required for technology absorption. One cannot buy R&D capabilities; they have to be absorbed over time. But will this alliance get a competitive edge as strong as that with Honda?

While Honda’s experience has ranged from making small vehicles to 500 cc motorcycles to superbikes, EBR’s is restricted to engineering motorcycles with existing Harley Davidson engines. Considering this, HMCL might just feel the need to shake some more hands to excel on the technology front.

However, the company would get an edge with its entry into Grand Prix racing, giving it a global image and displaying the capacity to deliver high-performance machines.

One big concern for HMCL would be competition. With Bajaj Auto’s focus on producing motorcycles of a higher functional capability and Honda’s power-packed standalone entry, HMCL’s standing as the industry leader is risk. It would have to move, and quick. Whether it is able to do so will be defined by the partnerships it signs in the near future.

While EBR seems to be one in the right direction, its sustainability and yield will be decided upon by its usage in product development.