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Pawan Munjal, chairman of Hero MotoCorp. The real challenge for Hero’s engines will be to match the performance of the current set of Honda mills that the company uses. Photo: Ramesh Pathania/Mint
Pawan Munjal, chairman of Hero MotoCorp. The real challenge for Hero’s engines will be to match the performance of the current set of Honda mills that the company uses. Photo: Ramesh Pathania/Mint

Hero’s own engines to power new Splendor, Passion

Two-wheeler maker has developed the engines, platforms in 110-150cc range to use in its top models from 2016-17

India’s largest two-wheeler maker Hero MotoCorp Ltd may just be approaching its toughest test after it separated from its erstwhile joint venture partner Honda Motor Co. five years ago.

Starting 2016-17, the company plans to roll out new Splendor and Passion motorcycles with indigenously developed engines and platforms, two people familiar with the matter said.

Mint learns that the company has developed three engines and platforms in 110-150cc range to use for some of its top-selling models such as Splendor, Passion and Glamour. The models currently use Honda engines.

For Hero’s indigenously developed products, the company’s current partner Magneti Marelli SpA will provide electronic fuel injection systems, which will increase the fuel efficiency of its motorcycles and scooters.

The engines have been developed under the supervision of Markus Feichtner, former head of Austrian engine maker AVL’s India Technology Centre who joined Hero late last year as its vice-president for research and development (R&D).

Hero’s chief technology officer Markus Braunsperger is leading the charge of developing the new platforms.

The real challenge for Hero’s engines will be to match the performance of the current set of Honda mills that the company uses. While Hero has managed a smooth brand transition after it broke away from Honda in 2010, experts say it is yet to make up for the loss of the technical know-how the Japanese firm brought to the table.

In the cost-sensitive Indian two-wheeler market, Hero has enjoyed an edge over its rivals largely due to the fuel-efficient engines that Honda provided.

That, coupled with Hero’s understanding of the local market, helped sales soar during the 27 years of the partnership.

The real challenge starts now as the products from Honda’s stable age, and there remains a big question mark over the success of new engines and platforms that Hero is developing on its own, said Abdul Majeed, a partner and auto practice leader at consultancy PricewaterhouseCoopers (PwC).

“(But) in my opinion, it is both a challenge and an opportunity," said Majeed. “Challenge because they will be developing platforms, engines, on their own, and opportunity because no one understands Indian consumer psyche better than them."

Hero Honda proved to be one of the most successful of a several similar collaborations between Indian and Japanese automobile companies in the early 1980s that resulted in the launch of several hyphenated brands. Hero’s challenge is similar to the one TVS Motor Co. faced after it broke up with Suzuki Motor Corp in 2001.

According to one of the two people familiar with the plans, a person directly involved in Hero’s new product development, the objective is to return to the basic premise with which Hero Honda launched its products: Everyone loves a fuel-efficient motorcycle. Hero Honda’s first campaign—Fill It, Shut It, Forget It—resonated with customers.

“This will be one of the biggest differentiators of Hero products from the competition," said this person, requesting anonymity.

Normally, it takes around four to five years to develop new platforms and engines, but Hero has moved quickly with its indigenous technologies, said the second person familiar with the development. “One thing is very clear that there is a lot of emphasis from Hero on getting the new platforms and engines production-ready as soon as possible," this person added, asking not to be identified.

“A lot of work is happening in-house. Hero wants to get its R&D centre up and running soon," this person said.

Hero is investing 400 crore in an R&D facility in Kukas, Rajasthan, that is expected to start operations in 2015-16. It will have around 600 engineers from India and elsewhere.

“Over the past few years, we have built up our in-house R&D capabilities, which we will further upgrade. We have recently improved the fuel efficiency of almost our entire range, and the record 102.6 km/litre mileage of Splendor iSmart is an example of this," a Hero MotoCorp spokesperson said in response to queries. “Our joint venture with Magneti Marelli has been working on developing fuel injection technologies, which will go into our future line-up of products. At this stage, however, we would not like to discuss any specifics about our future products and their likely launch dates."

Since separation from Honda, Hero has been seeking technology partners.

In February 2012, it had tied up with Erik Buell Racing (EBR) and later formed a partnership with AVL List GmbH and Italy’s Engines Engineering SRL.

In December 2013, it entered a joint venture with Fiat Group’s auto parts firm Magneti Marelli for engine systems, including a electronic fuel-injection systems, to improve the fuel efficiency of its bikes.

“Eventually, Hero would like to do away with every Honda technology it currently uses," the second person added.

Since June 2014, Hero has been paying royalty to Honda on products for which it sourced technology from the Japanese company following the separation—the Maestro scooter, and Impulse, Ignitor and Passion X Pro bikes.

However, Hero has suffered a big setback in pursuit of creating its own R&D capabilities.

Its technology partner EBR, in which it invested 150crore to pick up 49% stake, filed for bankruptcy in April, casting a shadow on the products that the American company was developing for the Munjals. In July, Hero said that it has acquired EBR’s consulting business, which includes the ownership of certain “tangible and intangible assets" of EBR entities. These assets are free and clear of all encumbrances.

Still, this means that Hero will have to develop as many as five products on its own; these were earlier being developed for the Indian company by EBR.

On Monday, Hero MotoCorp’s shares fell 0.15% to 2,424.80 on the BSE, while the exchange’s benchmark Sensex shed 0.10% to 26,192.98 points.

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