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Hero Buys 49.2% Stake in Erik Buell Racing

Wednesday, July 3, 2013
Hero MotoCorp Ltd (HMCL) has purchased a minority stake in Erik Buell Racing. The Indian manufacturer will invest $25 million in the American company, earning a 49.2% share. Hero will have two directors and one observer on the EBR board of directors, but EBR founder Erik Buell will remain Chairman and CEO.

A press statement from Hero announcing the move states the $25 million investment will be done through Hero’s new American subsidiary – HMCL (NA). The funds will be divided into two tranches, with $15 million already invested and $10 million “proposed to be invested within the next nine months.”

Pawan Munjal, Managing Director and CEO of Hero said of the decision: “The equity partnership with EBR is reflective of our long-term vision of transforming Hero MotoCorp to a truly global two-wheeler major with footprints spread across continents, offering a wide range of technologically-advanced two-wheelers. Indeed, this equity partnership is a natural extension of our existing relationship with EBR, which is going to further strengthen our strategic alliance. As we go on spreading our footprint in new international markets, we will look at having extended centers of our own R&D at multiple locations around the world, developing two-wheelers for our global customers. Our evolving relationship with EBR is an initiative in that direction. We will continue to look for both organic and inorganic growth as we keep expanding globally. Our fully-owned new overseas subsidiaries such as the one in the US and in Netherlands will play important roles in our future overseas acquisitions and investments.”

Hero is currently the world’s most prolific motorcycle manufacturer, with reports of 5.9 million units during the past fiscal year (April 2012 – March 2013). It produces small-displacement mounts for the high-volume Indian market. The next-highest volume manufacturer in India is Honda Motorcycle & Scooter India (HMSI) at 2.6 million units sold and Bajaj at 2.5 million units.

The Indian firm was formerly known as Hero Honda – a successful joint venture established with Honda in 1984. The two parts sundered the JV agreement in 2010, with Honda focusing development on HMSI – its wholly-owned subsidiary. Hero bought out Honda’s share, while retaining license to produce some of Honda’s existing product. The end of the JV agreement allows Hero to export models, which had been prohibited, with aggressive plans claimed for international expansion.

Hero had previously announced a strategic alliance with EBR. Buell contributed design assistance for the Leap gas/electric hybrid scooter. Hero technicians have also been a part of the EBR AMA American SuperBike squad, with Hero a major sponsor for the EBR racing program since the 2012 season.

The collaboration with EBR will aid in Hero’s R&D and engineering development, which the company is lacking since the departure of Honda. Meanwhile, the investment dollars for EBR will aid in production and manufacturing development at the East Troy, Wisconsin firm – which produces the $39,999 1190RS Superbike. EBR also teases “future models” with the RX, SX and AX model designations.

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Comments
raj_pol   July 19, 2013 06:31 AM
Hero is facing a lot of heat from both Honda and Bajaj group in India. Specifically in the performance bike segment (in India it would be bikes between 250cc to 500cc) they are losing out big time to their competitors. However, I am not sure if Buell is a smart move as I do not see any or maybe very limited adavantage for Hero out of the same.
VinceXB   July 8, 2013 12:38 PM
Seems like a good shot in the arm for EBR. I just hope that Erik doesn't make the same mistake with Hero that he did with H-D.