Auto sector divorces and the life after for Indian partners

Murali Gopalan
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Japanese automaker Honda has bought out the stake of its Indian partner Siddharth Shriram. — Kamal Narang
Japanese automaker Honda has bought out the stake of its Indian partner Siddharth Shriram. — Kamal Narang

Honda had its second high profile divorce in India in less than two years after the break-up with the Hero group in December 2010. Earlier this month, the Japanese automaker bought out the stake of its Indian partner, Siddharth Shriram, in its car alliance.

Over a decade ago, Honda called it quits in the alliance with the Pune-based Kinetic group which had brought the gearless scooter revolution to Indian roads. A wholly-owned entity, HMSI (Honda Motorcycle & Scooter India), was created to carry this business forward and is the clear leader in gearless scooters. Its next mandate is to emerge top in the Indian two-wheeler space where former ally, the Hero group, rules the roost.

Honda is one among a long list of multinational automakers which kicked off their India innings with a local partner before heading out on their own. Indian companies could contribute precious little in technology and financial support beyond a point.

They opted for the pragmatic option of exiting and reinventing themselves instead. The two names that immediately come to mind are the Tatas and Mahindras who have since acquired global brands like Jaguar Land Rover and SsangYong Motor.

Turning point

The 1980s was the turning point for the Indian car industry with the entry of Suzuki and the creation of Maruti Udyog. It was also the time the Japanese were creating waves in the two-wheeler segment. Suzuki had teamed up with the TVS group, while Honda and Yamaha opted for the Hero group and Escorts, respectively, as their allies.

The motorcycle revolution would soon topple the geared scooter reign and, in the process, Bajaj Auto lost its premier slot to Hero Honda. It had a partner in Kawasaki for motorcycles but, unlike the other Indo-Japanese alliances, there was no equity here.

By the late-1990s, Escorts and Yamaha had decided to part ways, while Honda and Kinetic, which had created the gearless scooter magic, followed suit. The next high-profile divorce involved TVS and Suzuki.

It was not easy going thereafter for some of these companies. Yamaha found it difficult to put its house in order while Kinetic just could not take the HMSI onslaught beyond a period of time. It ended up selling its two-wheeler business to Mahindras.

Victor magic

TVS was on a roll with the Victor after parting with Suzuki (which, in turn, has its own two-wheeler arm for bikes and scooters) but has not managed to create the same magic in motorcycles since then, though it has been doing a lot better in scooters. Bajaj and Kawasaki are going strong even today and the latter is a vital part of its Indian partner’s global business.

In cars, Indian companies lost little time in forging alliances with big names in the global business when they decided to invest in India during the early 1990s.

The list was long and included Premier Automobiles in two joint ventures with Peugeot and Fiat; Tatas and Daimler; Mahindras and Ford; Hindustan Motors with General Motors and Mitsubishi (technical without equity particpation); Toyota and the Kirloskars; and Honda and Siddharth Shriram.

All, barring Toyota-Kirloskar, have seen the Indian partners eventually exit. Mahindras made a comeback in the car space with Renault years later but ended up buying the French partner’s stake and manufacturing the Logan themselves. Premier identified a Chinese ally to announce its comeback in the automobile space with the Rio SUV.

The Tatas got into cars with the Indica in the late-1990s followed by the more ambitious Nano project in 2008. Their acquisition of JLR has helped boost their car business revenues, while the Mahindras are working towards a turnaround plan for SsangYong.

Not everyone gave Indian carmakers a chance of survival when the multinationals entered the market. It is to their credit that they focused on their core competencies and held their own in an intensely competitive arena.

(This article was published on August 18, 2012)
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