Hero MotoCorp won’t be paying royalties to Honda anymore and they will utilise the money for their own products.
Effective 1st July 2017, Hero MotoCorp has decided to put a halt on the royalty payments to Honda. The Hero-Honda joint venture got terminated at the end of 2010 and Hero has paid its former joint venture partner Rs. 388.96 crores in annual royalties since then.
Hero MotoCorp will be making use of its Centre of Innovation and Technology (CIT) at Rajasthan for its current and further technology requirements. Headed by Markus Braunsperger, a BMW veteran of 25 years, the CIT at Rajasthan has been built with an investment of $126 million and employs 500 engineers from across the globe.
The cash reserved previously for the royalty payments can now be used for other relevant purposes by Hero MotoCorp. Hero’s focus is currently on the premium motorcycle and scooters segment. A 200cc sports-bike is ready to be launched at the 2018 Auto Expo and according to vendors familiar with the development plans, the company may also launch an all-new Passion later this year.
Hero is also phasing out models with Honda’s technology and replacing them with latest 2-wheelers. For instance, the Maestro has been replaced with Maestro Edge and Duet, the new Glamour replaces the Ignitor and the Passion X-Pro is being replaced by the Splendor iSmart 110.
Hero had to pay Honda 45 billion yen (Rs. 2350 crore then) for continuing with the existing product range in 4 installments by June 2014, under the separation agreement. After the June 2014, royalty commitments were on ‘license B’ products (those products for which Hero had sourced technology from Honda, that included the Impulse, Passion X-Pro, Ignitor and the Maestro). The royalty on these products was to be paid up to 30th June 2017 and post that date a new agreement would have to be signed, to which Hero has decided against.
Hero MotoCorp with the help of its CIT has completely revamped its entire portfolio with its own products that are designed and developed at the CIT. However for the existing licence B products, the company will be continue to make parts available for the next 10 years (people currently owning the Impulse, Passion X-Pro, Ignitor and the Maestro, peace is assured).
Hero MotorCorp Royalty
– Hero will halt the royalty payments to Honda W.E.F 1st July 2017
– The Hero-Honda joint venture was terminated at the end of 2010
– Hero has paid Rs. 388.96 crores to Honda in annual royalties
Source – ETAuto.com