Munjals-owned Hero MotoCorp will buy technology from EBR without sharing profits or ownership. After its December 2010 breakup with Honda, the Indian company had been scouting for new technology to compete better in the domestic two-wheeler segment where it holds 56% market share.
"It's a very flexible partnership where they will develop cutting-edge technology based on our needs and market demands," Hero MotoCorp managing director and CEO Pawan Munjal said, adding that the company will first develop bikes bigger than its top-end 225cc Karizma ZMR.
EBR, a specialist in customised superbikes, is already working on some of Hero MotoCorp's products and will develop new bikes and scooters that are likely to hit the market in 2013. Hero does not intend to launch 1,000cc and above superbikes immediately and will gradually move up the value chain.
Hero MotoCorp , earlier known as Hero Honda, competes with Bajaj, TVS, Honda and Yamaha in the domestic two-wheeler segment, which is forecast to grow 10%-12% in the next fiscal year. It had grown into the world's largest-selling bike brand on the back of technology from the Japanese automaker, with which it was sharing equity and paying royalty on every product. Honda, which operates its own subsidiary in India, is currently Hero's closest rival in the domestic market.
Hero, one of largest business houses in India, posted its highest quarterly profit at Rs 613 crore in the quarter ended December 31. The company, which is reported to have cash reserves of more than Rs 4,000 crore, plans to enlarge its R&D setup at Daruhera into a full-fledged design and engineering centre with EBR's help.
"We are open to all options as we move into being a diversified automotive company," Munjal said.
EBR has already developed a hybrid scooter concept, Leap, which was showcased by Hero at the Auto Expo in New Delhi earlier this year.
"We are already customising technologies for Hero MotoCorp using the frugal Indian engineering expertise that would be available for developing different kinds of two wheelers," EBR chairman Eric Buell said, adding, "After Leap, we plan to bring in some bikes that would have a global appeal and can be locally manufactured."
Separately, Hero also announced plans to enter motorcycle racing by sponsoring two teams-Hero and AMSOIL Hero-in the AMA Pro Racing National Guard Superbikes Championship in the USA. "As a company to nurture sporting talent, we intend to develop a full-fledged team for racing and would gradually develop teams from India," Munjal said.