Hero MotoCorp has a royalty based technical agreement with Japanese two wheeler giant Honda until 2014, for using engine technology that Hero acquired from Honda during its 27 year old joint venture with the Japanese firm, which incidentally ended last year. After 2014, Hero MotoCorp will have to fend for itself even as the possibility of Honda lending its technology to Hero MotoCorp even upon payment of royalty looks unlikely as Honda aims to unseat Hero as the world’s largest two wheeler maker by directly competing with Hero MotoCorp in the Indian market. Hero MotoCorp, in the meanwhile, is looking to roll out its first indigenous product by 2014.
So, Hero needs to urgently shore up its internal research and development for new product development. While Hero has already begun investing in its R&D capabilities, the two wheeler maker has just announced a tie up with Austrian engineering major AVL(Anstalt für Verbrennung skraftmaschinen List), to develop a new range of engines that will propel Hero MotoCorp into the future. Hero has already begun work with AVL who also has an Indian development center at Gurgaon, India. AVL Austria is a well known name in the Indian automobile industry. Royal Enfield teamed up with AVL to re-engineer its age old Cast Iron engines.
The result was the 350cc and 500cc lean burn aluminum engines that AVL developed for Royal Enfield, and these engines were a big improvement when compared to the cast iron engines in terms of reliability and fuel economy. Similarly, Mahindra also worked with AVL to develop the 2.6 Liter turbo diesel engine for the first generation Scorpio SUV, which again was a massive success for the Indian car and utility vehicle major. So, AVL has been quite successful in India although it would be a big challenge for the Austrian firm to match and exceed Honda’s expertise in engine building, for Hero MotoCorp.
That said, Hero MotoCorp’s recent tie up with American motorcycle firm, Erik Buell Racing, will be independent of the AVL tie up. By partnering with AVL, Hero MotoCorp is also looking at stretching its engine portfolio, which currently measures 100cc to 223cc, to higher displacements. So, Hero MotoCorp might launch bigger engined motorcycles in the future even as it seeks to enter export markets in a big way with the two wheeler major aiming to target 1 billion USD in exports by 2020. Meanwhile, here is what Pawan Munjal, the Managing Director of Hero MotoCorp, has had to say about Hero’s association with AVL Austria,
We have tied up with AVL to develop our in-house capabilities in engine technologies. A team from our R&D division is already in Austria. Our team is also working in close coordination with AVL India Technical Center based in Gurgaon. The team is working on a few options across motorcycles and scooters. We would be developing engines of all sizes to make new products and also refurbish the existing product lines. Gradually we will develop our own full-scale R&D facility to make products for global market on our own. The multiple technology and engineering would leapfrog to the next level even as we internally enhance our R&D to make products for trans-continental markets.