New Delhi: India’s largest two-wheeler maker Hero MotoCorp. Ltd (HMCL) on Thursday said it has tied up with Italian two-wheeler design house Engines Engineering (EE) to improve its in-house technology and design capabilities.
Engines Engineering will partner with Hero to develop new products for the two-wheeler maker. “The Bologna-based firm will impart technological know-how in terms of superior designing for the future products to be launched by HMCL,” Hero MotoCorp. said in a statement.
In 2008, Mahindra and Mahindra Ltd, largely a utility vehicle and truck maker, acquired a 70% stake in Engines Engineering—which had Honda, Yamaha and Ducati as customers—for Rs.40 crore to strengthen its research and development capability in two-wheelers.
But in 2011, Mahindra sold its entire stake in Engines Engineering back to the design company’s promoter Alberto Strazzari. While the reason for this is still unknown, an analyst tracking Mahindra said Engines Engineering’s clients had raised concerns over the Indian company’s proximity and control over design.
“EE was doing work for a lot of other OEMs (original equipment makers, or two-wheeler makers) and they were not comfortable with working a company that competes with them in the same market,” said the analyst, who works with a leading brokerage in Mumbai.
While Hero needs good research and development (R&D) support, it should ensure it finds the right partners, said another analyst. “Unlike Bajaj and TVS who pursued in-house R&D, Hero seeking outside help is fraught with risks” as it could be tough for the company to synergize diverse inputs from its various partners, he said.
Set up in 1979, Engines Engineering is an end-to-end motorcycle designer. Its expertise ranges from conception and design to styling, on line assembly, industrialization and marketing.
“I see this as a long-term partnership and there is immense scope to expand this alliance as we go along,” Hero MotoCorp.’s chief executive and managing director Pawan Munjal said. “This is also in keeping with my vision of having multiple centres of excellence located strategically across the globe.”
The partnership with Engines Engineering is the third such for Hero. After its separation with Japanese manufacturer Honda Motor Co. Ltd in late 2010, the firm tied up with US-based two-wheeler maker Erik Buell Racing Llc. and Austria-based engine maker AVL. Last week, Munjal said he intended to pick up equity stake in his partners in the long term.
An analyst tracking the sector said too many tie-ups could be confusing for Hero.
“I am not very sure what they are looking for,” said Joseph George, sector analyst, India Infoline Ltd, a Mumbai-based brokerage. “There may be some sort of overlap with AVL, which also specializes in similar kind of activities that Engines Engineering does and you would not expect all of them to spend energy on one particular thing. So, the company needs to specify who will do what.”
Hero shares rose 1.87% to Rs.1,819.10 on BSE on Thursday, outpacing the Sensex that stayed nearly unchanged at 18,021.16 points.