On how Hero Honda could milk it’s commuter motorcycles for a long time to come!

2011 Hero Honda Splendor NXG

Last week, Indian motorcycle market leader Hero Honda paid Japanese auto giant Honda a whopping 2,479-crore as a one time settlement for producing all existing products without any additional royalty for perpetuity. This amount will also cover new products launched by Hero Honda till 2014, after which it will have to pay 5% to Honda as royalty on new products alone.

What this deal could essentially do is, it could make Hero Honda continue producing the Splendors and the Passions of the world until the market really says, no thank you! This, as the aformentioned motorcycles still continue to sell very strongly and dominate the market even as newer motorcycles like the Bajaj Discover 100 and the TVS Star City have tried to usurp the Splendor-Passion duo’s market by offering a lot more features and novelty.

Even so, it hasn’t deterred commuter motorcycle buyers from patronizing the Hero Honda brand as it is still the de facto leader when it comes to bomb proof reliability and after sales service network. Meanwhile, Hero Honda plans to spawn new models based on the Splendor, Passion and CBZ platforms which is expected to be the next crop of models that the firm will unveil in the near future.

With that, it is almost certain that the current crop of Hero Honda motorcycles will sell until sales really begin to taper off. If you were expecting somr cutting edge R&D from Hero Honda, it simply doesn’t seem too likely even though Hero Honda says that it is in the process of shoring up it’s R&D operations. That could take about half a decade to actually produce something worthwhile and until then, the commuter motorcycles are expected to keep the Hero Honda flag flying high.

Here’s Hero Honda Motors Ltd Chief Financial Officer Ravi Sud commenting on Hero Honda’s future plans and the one time payment to technology partner Honda.

We have the right to use the (Honda) technology in perpetuity for the existing models as part of the arrangement. Earlier, we had to take Honda’s permission to make a change even on the design graphics but now we can change the engine or gearbox or develop on the platforms, if we wish, on our own. Well, we have the rights and we would like to use it(on being asked whether Hero Honda will use exiting available Honda technology).

Via TheEconomicTimes