The Hindu Business Line : Hero Motors ties up with Bombardier-Rotax for engines

Mr Pankaj Munjal, Managing Director, Hero Motors (left), with Mr Yves Leduc, Vice-President and General Manager, Bombardier-Rotax, at a press conference in the Capital on Thursday. - Ramesh Sharma

New Delhi , April 22

HERO Motors has announced a licensing agreement with Austria-based Bombardier-Rotax that will provide 125cc-175cc engines for the upcoming `Hero Aprilia' range of scooters. The entire project would entail an initial investment of Rs 200 crore, which would be pumped in by Hero Motors.

"We will source technology for four-stroke, water-cooled 125cc and 175cc scooter engines from Bombardier-Rotax for Hero Aprilia scooters, to be launched in May 2005," Hero Motors Managing Director, Mr Pankaj Munjal, said at a news conference on Thursday.

Bombardier-Rotax, which is a subsidiary of Bombardier Recreational Products, would also source auto components from Hero Motors and provide total quality management support to the Munjals-owned company. The auto components sourced would be for higher displacement engines being made at the Austrian facility.

The company would also source the smaller capacity engines from Hero Motors due to cost effectiveness, Mr Yves Leduc, Vice-President and General Manager, Bombardier-Rotax, said.

According to Mr Munjal, the total size of the sourcing deal would be to the tune of about $90 million (Rs 396 crore) over the next five years.

Hero Motors plans to launch two four-stroke gearless scooters - 125cc and 175cc - in May next year for which the company has inked a deal with Italy-based Aprilia for bodies, while the scooters will be fitted with Bombardier-Rotax engines. The first Hero Aprilia scooter, however, will be launched by the end of this year, equipped with a 92cc engine (not from Bombardier).

The 92cc scooter, to be called Sonic, would be manufactured at the company's Ghaziabad plant where production capacity would be augmented to 1.5 lakh units in the next 15-18 months, Mr Munjal said.

Hero Motors is also in the process of setting up a greenfield project at Manesar (Haryana) for its scooter. The company aims to have a total capacity of 4,00,000 units by next year in view of its targets for the domestic and export markets for the Aprilia scooters. According to Mr Munjal, the company expects about 50 per cent of its sales to come from exports.

Hero Motors had announced a technology agreement with Italian two-wheeler major Aprilia last year. Aprilia will also source scooters from Hero for sale in Europe and other Asian markets.

Hiving of 20% stake

Hero Motors said that it is in talks with several players to sell 20 per cent equity stake in the company. According to market talk, the equity would most probably be sold to Aprilia.

Incidentally, the Munjals-promoted Hero Motors is in the process of being hived off from Majestic Auto, following which the equity sell-off is likely to happen. After being hived off from Majestic Auto in the next couple of months, Hero Motors would be 95 per cent owned by the Munjal family.

Meanwhile, with its plans in place, Hero Motors is hopeful of making profits this fiscal.

"We are hopeful of posting cash profits during 2004-05. The company had posted a loss in the last fiscal," Hero Motors Chief Operating Officer, Mr P.V.V. Srinivasa Rao, said.

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