Honda waves goodbye to Indian Hero

After 25 years in business, Honda has decided it's better off alone in the enormous Indian motorcycle market -- the second largest on the planet -- than with its current bedfellow, Hero Honda.

The motorcycle giant has sold its 26 percent stake in Hero Honda, and will go it alone in the Indian market with its own subsidiary, Honda Motorcycles and Scooter India (HMSI).

The decision was made by Honda HQ to sever ties with Hero Honda, selling its $1.2b share of the company back to Hero Honda, which has a massive 59 percent market share in India.

The ramifications of this move will be significant and could result in a number of new, dirt-cheap Indian models making their way to external markets, such as Australia. We already have Honda's new CBR250R coming to Australia which is made in Thailand and Honda has plans to build the new entry-level sports bike in India, where it will no doubt sell like proverbial hotcakes.

Not unlike the Chinese market, if a motorcycle or car maker wants to build and sell vehicles in India it must jump through several hoops and usually form an alliance with a local company.

Back in 1984 Honda wanted to get into the Indian marketplace and so it formed an alliance with Indian bicycle maker Hero, and Hero Honda was born.

The Hero Honda company has a massive 59 percent market share in India at last count (November 2010), meaning that roughly two out of every three new motorcycles on the road are Hero Hondas.

Honda's Indian arm, HMSI, already has 17 percent market share which is a pretty good base to build from and the company is expected to focus on the big-selling small displacement motorcycles in India to improve its bottom line. HMSI has plans to build a new plant within the country and hopes to manufacture around two million motorcycles per annum.

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