Escorts-Yamaha Motors Break-Up*



Case Code : CLBS029
Publication date : 2004
Subject : Business Strategy
Industry : Two Wheeler
Length : 04 Pages
Price : Rs. 50

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Key words:

Joint venture, flagship, acquisitions, shareholder, Escorts-Yamaha Motors

* This caselet is intended for use only in class discussions.
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The caselet traces the various developments from the time the joint venture took place till the breakup in 2000. In 1995, Escorts and Yamaha Motors formed a 50:50 joint venture (EYML). However, in mid 2000, Escorts divested 24% equity to Yamaha Motors and as a result, Yamaha Motors became a majority stakeholder in the venture (74:26).


 » Why Escorts pulled out of the joint venture and how this move is going to affect Yamaha Motors.
 » Escorts’ new business initiatives and how the company is placed to succeed in new economy businesses.


In 1985, Yamaha Motor Company (Yamaha Motors) entered into a technical support agreement with Escorts Limited (Escorts), and started local production of Yamaha motorcycles. In 1995, Yamaha and Escorts signed another contract, establishing Escorts Yamaha Motor Ltd.

(EYML) to manufacture and market motorcycles in India. Each company invested 50% of the capital for the Indian motorcycle venture. The joint venture manufactured Rajdoot motorcycles at Faridabad and the RX and four-stroke YBX series at Surajpur. EYML had the largest countrywide network of over 500 dealers, supported by a wide base of sales & service outlets and spare parts stockists.....

Questions for Discussion:

1. Both Escorts Motors and Yamaha Motors entered into a joint venture to manufacture and market motorcycles in India. What was the rationale behind this joint venture and what synergies were expected out of this joint venture?

2. In May 2000, Escorts took the decision to sell off 24% stake. In May 2001, Yamaha Motors struck a deal with Escorts for acquiring the latter’s 26% shareholding in YMEL for Rs. 700 million. The deal marked Escort’s exit from the joint venture. Why do you think Escorts exited from the joint venture?