India's top motorcycle maker, Hero Honda, has agreed to increase its royalty payments to Honda Motor Corp to 8 per cent of annual sales in return for a technology makeover and a stake sale by the Japanese firm in the venture, according to a report.
This may pave the way for Honda Motor's exit from Hero Honda, their joint venture with India's Hero Group, Business Standard reported today.
The newspaper cited unnamed industry sources as saying that Honda had agreed to cut its stake in the joint venture with India's Hero Group to 20 per cent from 26 per cent now, and to sell the balance to Hero Group at a discount to the current market price.
Under the proposed agreement, Honda would supply the technology for three new products to Hero Honda, in addition to the existing product portfolio, it said.
The move would mean a three-fold increase over the Rs500 crore that Hero Honda presently pays every year as royalty fees to Honda Motor Corp. The outgo amounts to 2.2-3 per cent of its annual sales.
The increased annual payment would be till 2014, when the present technology sharing agreement is to lapse, at which point or before, it would be renegotiated, according to the report.