Kinetic Honda - The Break-Up

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Case Details:

Case Code : BSTR003
Case Length : 12 Pages
Period : 1998-2001
Organization : Kinetic Motor Limited, Honda Motors Ltd.
Pub Date : 2002
Teaching Note : Available
Countries : India
Industry : Automobile & Automotive

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Return of the Prodigal

In August 1999, Honda announced that it was setting up a wholly-owned subsidiary to manufacture scooters in India with an initial capacity of one lakh units per year.

The company set up an independent distribution network for the new venture. Through this $ 43 million subsidiary, Honda planned to focus on scooters for a period of five years. Later, Hero Honda and the Honda subsidiary were to be free to expand the range to include all two/three wheelers. Honda's first scooter model was launched in mid-2001. Around one-third of the total proposed outlay of Rs 150 crore had already been invested by that time. Though the contract with the Firodias prevented Honda from manufacturing the same scooter through a subsidiary or a joint venture, Honda got around the clause by introducing scooters in a different range. A Honda official said, "This is an extremely important market for us and there is no question of giving up the scooter business - we never give up..."

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Exhibits

Exhibit I: Indian Two Wheeler Industry
Exhibit II: Two-Wheeler Industry Market Shares
Exhibit III: Balance Sheets - Kinetic Honda
Exhibit IV: Kinetic Honda - Sales Breakup
Exhibit V: Income & Expenditure Statements - Kinetic Honda

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