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Hero MotoCorp: Promising rise of future transnational manufacturer
Hero MotoCorp (HMC – formerly Hero Honda Motors), based in India, is one of the world’s largest motorcycle manufacturers and is setting itself up to expand globally following the dissolution of its partnership agreement with Honda Motor Co. Ltd. in 2010 and the expiration of licensing contracts for Honda technologies in 2014.
The first stage of this expansion has been to target developing markets, an approach that indicates an intention to sell existing style products to similar markets in order to leverage the know-how that HMC has already developed, particularly around distribution methods in markets with limited rural infrastructure and product options for regions with low per-capita incomes.
This marks a very interesting turn in international trade; a sign that developing economies have evolved sufficiently strong domestic markets to begin exporting their own products to, or producing products in, lower tier developing countries. This is a completely different approach to the top down international trade that has largely been in place up until now, with powerful mature market businesses setting up facilities in developing countries to exploit low cost manufacturing in order to export back to home markets, or simply the supply of low-cost raw materials from developing to mature markets. The market for cheap products in very low per capita income countries with scant infrastructure has not been one taken up with much gusto to date. Yet the movements of the Indian motorcycle manufacturing industry imply that this is set to change; domestic players from developing countries will now begin to use lower-tier countries as a platform for international expansion and a basis from which to invest in developing novel technologies in order to start entering wealthier markets with premium products.
An interesting question is whether HMC will begin, as mature market companies have done, to import back to India from its newly opened operations in Asia and Africa. Whilst it is too early to tell whether this will be a viable strategy for HMC, it would certainly mark a real turning point for the Indian economy, and international trade, if it became a profitable proposition.
For an in-depth analysis of HMC’s rapid rise to market dominance in India and its strategies for global expansion, see MarketLine case study ML00019-027, ‘Hero MotoCorp: Promising rise of future transnational manufacturer‘. Available here to MarketLine Advantage subscribers and here in single copy format.