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Hero MotoCorp shuts down US company after failing to launch bikes

The US subsidiary was formed to launch Hero products

October 24, 2019 / 10:52 AM IST
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India’s largest two-wheeler maker Hero MotoCorp has closed down one of its two fully-owned subsidiaries in the United States  even before launching any of its products in that market.

The subsidiary was formed with the objective to invest into companies engaged into consulting, design, development, manufacture and distribution and assemble two-wheelers.

The Delhi-based company announced on October 23 that its 100 percent subsidiary HMCL (NA) Inc. would initiate the process of its dissolution with the Delaware Secretary of State. The process is expected to be completed in six months.

HMCL (NA) Inc invested in Erik Buell Racing, Inc (EBR) by buying nearly 50 percent stake in that company, making the investment a first by the maker of Splendor outside India. EBR, a motorcycle engineering, designing and manufacturing firm ceased operations and later filed for bankruptcy protection.

"North American entity mentioned by you was formed to invest in EBR, our erstwhile partner in the US. With EBR subsequently filing for receivership and ceasing its operations long back, this investment arm had become a non-operating subsidiary. As a logical step to simplify our operations in that region, therefore, we have decided to close this subsidiary," Hero MotoCorp said in a statement.

Hero hoped to launch two-wheelers in the US market through this arrangement. The company promised to bring Hero-branded motorcycles in the US and Canadian markets in the summer of 2014. EBR was to handle the distribution of Hero products.

This is in addition to export plans of Hero to the US, which were manufactured at its Colombian plant started in 2015. While Hero products never made it to the US market, no product of EBR was ever launched in the US market either.

No Indian brand, with the exception of Eicher Motors-owned Royal Enfield and Mahindra & Mahindra (low power, electric scooter), has been able to launch two-wheelers in the US market.

Hero’s second company registered in the US is HMCL Americas Inc. This entity, however, is responsible for controlling the Latin American markets such as Argentina, Bolivia, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala and Honduras.

Colombia and Bangladesh have a Hero Motocorp manufacturing plant each with a combined production capacity of 230,000 units a year.

Hero has not been able to ramp up its exports from India significantly after its break up with Honda in 2009-10.

During the last financial year, the company sold just 2.6 percent of its production to markets outside of India. In comparison, Bajaj Auto exported 40 percent of its production to markets in Africa, Asia and Latin America including premium bikes made under the brand KTM.

With 208,056 units of exports in 2018-19, Hero Motorcorp recorded just 2 percent increase in volume compared to 2017-18.

In the year (2010-11) immediately after its separation with Honda Motor Company, the Munjal family-controlled firm exported 1.33 lakh units representing less than 3 percent of its total production.

Hero claims to serve a total of 37 countries.

"As far as global business is concerned, our focus continues to be on developing and emerging markets such as South and Central America, Africa, and Asia," Hero MotoCorp added in the statement.
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Swaraj Baggonkar
first published: Oct 24, 2019 10:04 am