Now who didn’t see that coming? Hero MotoCorp partnered with Erik Buell Racing (EBR) last year and started investing in the company heavily. Erik Buell was earlier a part of Harley-Davidson but was spun off due to the financial downturn. India’s largest 2-wheeler manufacturer has decided to purchase 49.2% stake in Erik Buell Racing for $25 million (Rs. 148 crore). Hero MotoCorp is purchasing the stake in EBR through its US unit which has already poured in $15 million (Rs. 88.9 crore) in the company. The remaining $10 million will be invested by the end of this fiscal year.
So why is Hero MotoCorp investing so heavily in EBR? Hero MotoCorp has financial strength but not much technical and R&D capability as the company has relied on Honda for technology since inception. After its split with Honda, Hero was left in a difficult situation. The company has to stop selling products with Honda technology from next year (unless it pays them royalty) and thus the focus on tie-ups and partnerships has been heavy. Besides EBR, Hero has also partnered with Engines Engineering and AVL.
Hero MotoCorp is aware that it needs to produce commuter motorcycles on their own as even with these three partnerships, they need to have their own R&D capability. The company has started an R&D centre in Jaipur, which is also the largest in India. The company is expected to unveil a slew of motorcycles at the upcoming Auto Expo in February 2014. We can expect Hero MotoCorp to unveil the Karizma replacement, which will be a 250cc motorcycle developed with inputs from EBR. The company is setting up its fifth plant in Gujarat and is the leader in terms of sales volumes in the 2-wheeler segment by a big margin.
