Hero set to drop Honda from flagship brands

Hero MotoCorp Ltd. | Automobile Two & Three Wheelers | Automobiles | BSE: 500182 | NSE: HEROMOTOCO

09 Feb 2011 Evaluate

The Hero Group will remove the Honda brand name from its flagship products — Splendor and Passion by June this year as the Munjals, want to carve out an independent identity at the earliest. The Honda name will disappear from brands that are owned by Hero. Four best-selling motorcycles — Splendor, Passion, Glamour and Hunk — belong to this category. CBZ and CD, two 150cc motorcycles where Honda owns the brands, will not be part of this exercise. Splendor, a motorcycle fired by a 100cc engine, is the world’s most popular, with sales of around a million for the year ended March 31, 2010. Passion sells almost as much.

Though the Munjal-controlled Hero Group has recently signed a licensing agreement allowing it to use Honda’s technology till 2014, the rebranding is being expedited to gain a foothold in international markets. Hero Honda is setting up distribution channels in growing international markets such as Latin America, South East Asia and Africa. Under the technology agreement, Hero Honda cannot use the Honda brand name if they make any changes in the existing products.

\Hero is also entitled to see new Honda models till June 2017. The new models, produced using Honda's technology, will carry a higher royalty rate than the current 2.7%. The company is also building a margin hit of 50 basis points in the financial year 2012 and 40 basis points in the financial year 2013, to take into account higher advertising and promotion expenses for rebranding in India and existing export markets and business development expenses for entry into new export markets under a non-Honda brand name.