[man_and_machine]

I guess there are better ways to go solo from a JV, if that is the intention on this (proposed action). Honda did not have a bad selling cycle except for the natural disaster months, this affected not just Indian sales but most of S E Asia. Honda has no news of being reported as sick anywhere else (diesel is not the only decision criteria for buyers). More info might come out in the comings days, does not look like an exit plan for Honda!

[deetjohn]

Honda needs to go solo or find a new partner for the passenger car business in India. Auto business is highly cyclical. Perseverance is a must!

On the other hand, HMSI which is a wholly owned subsidiary is doing really well. They are the current #2 among the two wheeler manufacturers in the country. Yeah, the new Pulsar can change all that. But HMSI is looking strong.

[mukeshgoel]

4 Apr 2012
Hindustan Times (Delhi)

Now, Honda to part ways with Siel car partnership?

NEW DELHI: After parting ways with the Munjals at Hero Honda, it looks like Honda Motor Corp may go it alone in its car business as well.

The Japanese auto giant makes cars in India through a 17-year old joint venture, Honda Siel Cars India, with Shriram Industrial Enterprise (Siel). The latter has a minority 5% stake in the J-V.

The two partners are reportedly not seeing eye-to-eye over future investments, and SIEL is in talks to opt out of the JV.

“There is a thinking within Honda that they need to invest heavily in India in the coming years to stay abreast with the market, but as a minority player Shriram is not as interested in future investments,” said an analyst partly involved in the talks. “Discussions are on with regards to the valuation of Shriram’s stake.”

Honda recently invested around R1,200 crore through a rights issue to fund the expansion at its second plant at Tapukara, Rajasthan. It is also toying with the idea of an engine factory where its diesel engines could be assembled. It was not clear whether Shriram participated in the issue.

“India is definitely among the key markets for Honda, and HSCI is committed to this market with ambitious growth plans,” the company said.

Siel chairman Siddharth Shriram could not be contacted for comments.

Honda Siel posted a net loss of R35.31 crore in 2009-10, which widened to R212.83 crore in 201011 due to component shortage for a major part of the last financial year. Losses are expected to pile up further in 2011-12, a torrid year for the company due to natural disasters in Japan and Thailand.

The firm however said it cannot be termed sick under law.

[mayankjha1806]

MUMBAI: Japanese carmaker Honda Motor Company has invested Rs 1,200 crore through a rights issue in its Indian subsidiary, even as speculation gains currency that its co-promoter Shriram Industrial Enterprise (Siel) is likely to exit Honda Siel Cars.

Source : Honda increases stake in Indian subsidiary Honda Siel Cars through rights issue - Economic Times

My earlier post stating Honda owns 67% was incorrect, here is the correct data

If Usha International - the investment company for the Shriram family - has indeed not partaken in the rights issue, Honda Motors' stake in Honda Siel Cars will inch up to 96.84% from the existing 95%, while shareholding of Usha International will correspondingly come down to 3.16% from 5%. In case, Usha International decides to maintain its 5% stake, it would have had to shell out Rs 60 crore in the rights issue. There is no indication that the Indian partners had indeed subscribed to the rights issue.

[Jignesh]

Yes. Seems going solo may be better for Honda.

See how Honda has created a biggest "upset" in Indain Two Wheeler Industry. What they have done in two wheeler industry, they do have the capacity to do the same in Indian car market but not with current product portfolio.

Source: Times of India - 04.04.2012:

Honda zooms past 'Hamara Bajaj'
It is one of the biggest upsets in the Indian two-wheeler industry. Within just over a year of going solo in India, Japanese giant Honda has beaten 'Hamara Bajaj' with a comprehensive lead to emerge as the second-biggest two-wheeler maker, behind Hero MotoCorp (erstwhile Hero Honda) of the Munjals.

Honda sells two-wheelers through Honda Motorcycle and Scooter India (HMSI) after the split with Munjals. It has been aggressively ramping up production as well as sales, both in scooters and motorcycles.
Bajaj, on the other hand, has been launching products only in motorcycles as its managing director Rajiv Bajaj has made a conscious decision to bid adieu to the erstwhile bread-and-butter scooter segment.

According to industry sources, HMSI sold 2,12,812 units in March, while Bajaj could manage 2,10,383 units. HMSI had been taking pot shots at Bajaj's position for sometime now and is even believed to have surged past the Indian company once earlier, though it could not maintain the lead.

HMSI has its feet firmly placed in both the fast-growing segments of the two-wheeler market - motorcycles and scooters. The company (Honda) has the distinction of single-handedly reviving the near-dead scooter market in India after Bajaj started withdrawing from it due to poor sales. It also rapidly made inroads into the volume-laden motorcycle segment. This also saw the company edge out TVS from the third position.

While Honda's Activa and Dio are popular scooter models, Shine and Unicorn have given the company a good position in motorcycles. HMSI is set to make its most ambitious push with the Yuga, a 110cc motorcycle that will mark its foray in the volume-laden entry segment.
Bajaj, however, believes it is too early to make any judgment. K Srinivas, president of Bajaj's motorcycle business, said, "One swallow does not a summer make... We are indifferent to someone else's sales of scooters or mopeds as its irrelevant to our business." He said Bajaj is a "motorcycle specialist" and is the world's most profitable and third-largest motorcycle maker. The company wants a bigger play worldwide in the coming years.

Further analysis available here:
http://economictimes.indiatimes.com/...w/12526302.cms

Thanks,

[Nilesh5417]

Originally Posted by Jignesh

Source: Times of India - 04.04.2012:

Honda zooms past 'Hamara Bajaj'
It is one of the biggest upsets in the Indian two-wheeler industry. Within just over a year of going solo in India, Japanese giant Honda has beaten 'Hamara Bajaj' with a comprehensive lead to emerge as the second-biggest two-wheeler maker, behind Hero MotoCorp (erstwhile Hero Honda) of the Munjals.

This is purely a monthly figure for March. Annual volumes of Bajaj are still higher than Honda so lets not read too much into this news right away. And besides, Bajaj enjoys the healthiest of margins of all the manufacturers and their operating margins were quoted at 18%! These figures are in todays ET on page 4.
But while Bajaj scores over Honda in the Motorcycle portfolio, it is the resurgence of scooter segment thats taking Honda so close to Bajaj. And Bajaj doesn't have absolutely any fight back here. So if Honda does get its product mix right in the Motorcycle segement, Bajaj may be pushed down to 3rd spot in the sales volume. Honda have set a goal of garnering 20% market share in 2 wheelers by 2020 and they seem pretty serious about it.

Hero motors as of today a huge edge in sheer volumes annually with 50% plus of total 2 wheeler sales. It hasn't lost much immediately by Honda pulling out. The impact will be felt over a much longer period.

[sgiitk]

Originally Posted by Durango Dude

I think Honda Siel will have to have a good manufacturing base here instead of depending on Thailand and Japan for supplies and kits.

I think we may have to wait for their Rajasthan unit to start full blast. This should be not too far off, once this fracas is sorted out.

[GTO]

Originally Posted by mjumrani

So should I be worried about owning a Honda?
(I'm sure many would need an idea on that)

Not at all. Even if the Indian arm (Honda SIEL) is loss-making, Honda globally has tons of cash. India is too important a market for Honda to withdraw from. Honda Japan will keep supporting the Indian operations in whatever way required.

Originally Posted by sgiitk

They may be thinking of merging the two- and four-wheeler businesses into a single entity, with two divisions.

Brilliant post! I agree with the thought behind this.

Originally Posted by deetjohn

Honda needs to go solo

Well, owning 95% of the JV is nearly as good as solo. 100% ownership will happen sooner rather than later.

[srishiva]

In all of this, why is Shriram group hesitant on investing? At the stake they hold, it should not be a big amount. They are getting the right returns or cant wait ?

[vineethvazhayil]

Originally Posted by GTO

Not at all. Even if the Indian arm (Honda SIEL) is loss-making, Honda globally has tons of cash. India is too important a market for Honda to withdraw from. Honda Japan will keep supporting the Indian operations in whatever way required.

I guess Honda Japan has a few problems on their hand right now. After the instability in production last year, Honda never seems to have recovered completely. Per the latest sales figures for the US, Nissan has gone past Honda in the total sales for the month of March and Honda's sales have been on the decline for the last few months. With a lackluster Civic and an ageing Accord, Honda really needs to do something, and that too quickly, to have any hold in the US market also, or else they would be usurped by (or already have been displaced) the Hyundai - Kia combine also. On top of all this Acura has been having poor numbers for the last several months. I think Honda is in desperate need of change, they have fallen flat on their tactic of mimicking Toyota.

[souravc]

Originally Posted by GTO

Not at all. Even if the Indian arm (Honda SIEL) is loss-making, Honda globally has tons of cash. India is too important a market for Honda to withdraw from. Honda Japan will keep supporting the Indian operations in whatever way required.

I would agree that the money required for propping up the Indian operations is chicken feed as compared to the USD 13-14B cash that Honda has on its balance sheet . The question is how serious is Honda about the 4 wheeler segment vis-a-vis the Indian market - they are dead serious about the 2 wheeler segment which is beyond any doubt . They went through tremendous trouble in unravelling their JV with Hero and go it solo and have invested big money in 2 manufacturing units . I feel that they see India primarily as a 2 wheeler market , they would maintain the status quo (+/- a few percentage point of market share ) in the 4 wheeler segment - their pace of new product introduction , pace of response to market dynamics shows a fair bit of disinterest towards India . Compare Honda to what Toyota , Hyundai , VW has done in the Indian market and the stark contrast is there. Honda's show is more akin to what GM and Ford has been doing - make occasional noise but avoid the full plunge.

Originally Posted by vineethvazhayil

I guess Honda Japan has a few problems on their hand right now. After the instability in production last year, Honda never seems to have recovered completely. Per the latest sales figures for the US, Nissan has gone past Honda in the total sales for the month of March and Honda's sales have been on the decline for the last few months. With a lackluster Civic and an ageing Accord, Honda really needs to do something, and that too quickly, to have any hold in the US market also, or else they would be usurped by (or already have been displaced) the Hyundai - Kia combine also. On top of all this Acura has been having poor numbers for the last several months. I think Honda is in desperate need of change, they have fallen flat on their tactic of mimicking Toyota.

Great point and I think its US where Honda is going to pull out all stops and gun for market share , they have lost quite a bit of ground due to factors such as production disruptions, a rejuvenated GM / Ford and aggressive marketing by foreign players like Toyota , VW, Fiat ( Chrysler) , etc . Thats whrere their money pile would be stacked up to regain lost ground . All said and done , Indian market is puny as compared to US . Given the fact that Honda does not even pay much attention to Europe , I doubt whether they would bring their money pile to India.

[mayankjha1806]

^^ I don't think Honda can afford to ignore Indian market vis-a-vis US as US is their current cash cow, but its India which is the Star (Future potential). It might be small as compared to US market but in terms of growth and potential it needs to be at a higher priority.

If the senior leadership is smart (Which i think they are) they would not loose sight of future and make right investments in right areas to make them strong in future, and one of them is driving the Indian entity more aggressively and strategically rather than band-aid jobs.

[pgsagar]

US has been traditionally the biggest market for Honda, after Japan. But Honda did not bother much for the rest of the world. As a result, Honda's presence is not strong anywhere else in the world. Placing all their eggs in US basket was risky all along. Now when US market falters, Honda isn't left with much else. In Indian context, lack of diesel is their only bug-bear. Will they bring in a diesel? Not in near forseeable future. Their management moves at glacial pace. Emulating Mitsubishi?

[Yeldo]

IMHO, Honda's car business in India is suffering the bout of- how shall I put it- overconfidence? The City has been a best seller in all its iterations, the Accord succeeded in market leadership after a lackluster first attempt, and the Civic garnered good numbers in its segment. Even without a Diesel, Honda did all this. Remember, there was a time when one had to wait 3 months or more when the current CRV was launched. But Honda grew bold and constantly revised prices, and the basic premise when you shop for a Japanese car- good value- begins with good price, not just low maintenance or good FE. Look at the increase in prices to the CRV and Accord- what were Honda thinking? Even BMW or Mercedes cannot nowadays afford to overlook the buyers' value perceptions when pricing their vehicles. To boot, their leadership in petrol engines have begun fading in face of VW Group's TSI engines.

[deetjohn]

The Japanese make good long term partners. Ask Kirloskar.

I think this is a bad move by Usha International Ltd. Looks like they want to make a quick buck by selling the shares outside. But will actually get lower than what Honda was willing to give.

Business Line : Companies News : Usha Intl may rake in only Rs 126 cr from Honda Siel exit, say analysts