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Indian motorcycle company buy into Erik Buell Racing

Indian motorcycle company buy into Erik Buell Racing

India’s Hero MotoCorp Ltd (formerly known as Hero Honda)  has bought a 49.2 per cent stake in  sport motorcycle maker  Erik Buell Racing, headquartered in Troy, Wisconsin.

Pawan Munjal, the Director and CEO of Hero MotoCorp said the $25 million deal means the company is ready for international markets. “This is the first time that Hero MotoCorp (HMC) is buying a stake in a company outside India. This is the first step in globalisation of the HMC brand,” said Munjal. “As we go on spreading our footprint in new international markets, we will look at having extended centers of our own R&D at multiple locations around the world, developing two-wheelers for our global customers. Our evolving relationship with EBR is an initiative in that direction,” Munjal told reporters in New Delhi.

Hero and EBR had already begun a collaboration last year, in which Hero  gives EBR support (and sponsors EBR’s AMA Superbike effort) in exchange  for technical expertise. After a break-up with Honda
a couple of years ago, Hero MotoCorp has become India’s biggest  seller of motorcycles and scooters—5.9 million sold last year.  Virtually all of Hero’s products are tiny by American standards, with engines of 110 to 200 cc.  On the other hand, EBR produced just 65 high-end  1190RS bikes at $40,000 each. It was rated the best bike of the year by CycleWorld.

What this means

For EBR this is a great infusion of cash. Hero says it intends to ramp up production to 20,000 units by 2017. The India Expert views that claim with some skepticism. For Hero, it seems like a vanity purchase that may add sizzle to any high end products it plans to introduce in India in the future. Harley Davidson entered India a couple of years ago and this may be Hero’s response by shopping in Harley’s turf. Even if EBR could ramp to 20,000 units a year and find that many customers to buy super-high-end products, EBR sales would account for less than 20% of Hero’s current  revenue.

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