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Spate of divorces in the automobile industry- Good or bad? Spate of divorces in the automobile industry- Good or bad?

Posted on: January 13th, 2011 / In: Career

The automobile industry has seen its share of mergers and divorces in the past decade. While some have continued to sweep the market across, some could not attain their target market share. The latest JV to go separate ways is the Indo-Japanese group
Hero Honda. Though they may have mutually thought that the decision to separate to be beneficial for them, it may have far serious repercussions on various industry arenas.

Hero-Honda splits

The Motorbike JV divorce could mean it either creates more space for individual brand to breathe or it could also lead to disintegration of core brand values due to the separation. Surely, both the companies will face a good number of roadblocks in
their way ahead. However, the pool of opportunities that they will hit upon cannot be ignored.

Past mergers and acquisitions

In the past many mergers and separations have been witnessed. Kawasaki and Bajaj were at one time leading the market with their two-wheelers. Finally, the two parted away and it took some time for Bajaj to regain ground in the two-wheeler market.
Bajaj had its share of luck and now its latest offering, the Pulsar enjoys a comfortable position in the market. Suzuki and TVS also had their union going strong for some time after which they decided it was better to split up. However, one such split which
created some greater repercussions in the in the industry is that of Kinetic and Honda. Kinetic was badly hurt by the split and it was eventually taken over by Indian car maker Mahindra and Mahindra. Mahindra, with its new range of scooters is doing
quite well in the industry though it faces some tough competition from TVS’s latest launch Scooty Pep.

Though it is quite early to tell what ramifications the Hero-Honda Split will have on the industry, many industry experts have varied reviews about the separation. Industry experts feel that brand Hero and brand Honda have brought different brand ethics to the table. In the absence of each other, both will enjoy some amount of freedom while the void will also be felt at a later stage in the individual brand’s life cycle. Their individual paths ahead will open up some new opportunities which were not explored before.

Brand or the sub-brand?

The general feeling is that Hero as a brand will continue to rule the hearts of the mass markets whereas Honda on the other hand, will be more prominent in the high end segment of the market. The separation has also been viewed as something that will
open new export avenues for the Indian Brand. Another sentiment that is felt across is that the Indian brand Hero would sail the storm rather smoothly as it has Passion, Karizma, CBZ and Splendor to rely upon. All these sub-brands demand a large amount of emotional equity for the company and they will successfully help to retain the loyalty each sub-brand demands. Splendor, as a brand name is more popular than Honda. People buy a Splendor, not a Hero Honda Splendor. It clearly means that the
sub-brand enjoys more respect than the parent brand.

Technical know-how

Another body of experts feel that the divorce could mean brand Hero will be deprived of the technical know-how and the technology inputs that it shared with Honda. Lack of technology could mean Hero would have to invest in more manpower and
investment to focus on research and development. The strategies they adopt in future will determine the brand’s existence in the market.

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