Hero buys minority stake in EBR

  • Jul 10, 2013
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After signing a joint venture Erik Buell Racing (EBR) last year, Hero MotoCorp has gone ahead and brought 49.2 per cent stake in EBR for Rs 150.45 crore

Pawan Munjal and Erik Buell pose together

With an eye on the future, Hero MotoCorp announced that it has picked up a 49.2 per cent stake in Erik Buell Racing (EBR) for $25 million (Rs 150.45 crore). Hero has paid $15 million of the total deal amount upfront and would invest the remaining $10 million in the coming nine months. As part of the deal, Hero will have its owns representatives on the EBR board which includes two directors and one observer.

"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," said Pawan Munjal, Hero MotoCorp CEO while talking to the Economic Times.

EBR bike used for in AMA Pro Road Racing

The country’s largest two-wheeler manufacturer had already signed up with EBR (Related: Hero ties up with EBR) to help it in developing a 250cc for the Indian market last year and had also sponsored the American manufacturer in AMA Pro Road Racing for the past two years.  After this acquisition, Hero still only owns a minority stake as the majority stake still lies with the company’s owner Eric Buell. This progress by Hero can be seen as a move to strengthen ties between the two companies and the first product from this venture is expected to be unveiled at the 2014 Auto Expo in Delhi.

Pawan Munjal and Erik Buell pose together

Hero was in dire straits when its erstwhile partner Honda ended their 26-year partnership as it hadn’t invested in R&D and lacked the base for future development on its own. Also if Hero continued to use Honda technology from 2014 onwards, it would have had to pay the Japanese manufacturer royalty. To counter this situation and void in the R&D department, it went on a series of tie-ups with companies like Engines Engineering, AVL and EBR. Hero has learnt from its mistake and has started a new R&D centre in Jaipur which is the largest in the country to develop its own future line-up of bikes with inputs from its foreign allies. Also read: Will Hero Re-create the Magic with EBR?

With this deal, Hero has become the third Indian motorcycle manufacturer to posses an alliance with foreign two-wheeler manufacturer after Bajaj-KTM and TVS-BMW but is the only company to boast an alliance with an American brand. This deal is vital for Hero as EBR is the firm from its other tie-ups which holds the most experience in terms of designing and manufacturing. 

EBR bike used for in AMA Pro Road Racing
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Though, Hero still is the market leader in terms of sales but it has been unable to improve its progress on the volumes front. On the other hand, Honda has been consistently able to increase its sales volume and introduced a plethora of new models this year with a few more remaining in the pipeline by the end of the year.

Hero has started to expand its brand reach around the world and has started operations in Latin America and Africa to boost its sales but the need of the hour for it is to introduce new models for the Indian market to maintain its crown. Whether or not it can maintain its supremacy in the coming years and how far would this deal prove beneficial only time will tell but for the moment it seems to be a good move by Hero.

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