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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Starting Problem!

In 2001, the Kinetic Group had two automobile companies - Kinetic Engineering Ltd and Kinetic Motor Company Ltd.

After the December 1998 deal, Kinetic Honda Motor Ltd was renamed Kinetic Motor Company Ltd. Kinetic's story began in 1972 with the founder H.K.Firodia buying the 'Luna' moped's design from a foreign company. The moped, which aimed at capturing the bicycle market, went on to become such a huge success, that Luna became a generic name for mopeds. In 1985, under Arun Firodia's (H.K.Firodia's son) leadership, Kinetic tied up with Japanese auto major Honda Motor2 to form Kinetic Honda Motors Ltd. (KHML) with both the partners holding an equal stake of 28.56%. The company's primary business was manufacturing scooters. Sales of spare parts formed a minor part of the turnover.

The 'KH-100,' the first ungeared scooter in India, proved to be a huge success in the initial stages.

Throughout the 1980s, Kinetic remained India's largest moped manufacturer with a 44% market share and a 15% share3 of the overall two-wheeler market. A decade later, the company's moped market share halved to 22% and the overall market share figure reached an abysmal 5%. Also, in 1991, Kinetic, with a turnover of Rs 121 crore, was competing on an equal turf with the Rs 140 crore TVS Suzuki and the Rs 150 core Hero Honda.4 But by 1999, while TVS and Hero Honda grew seven times over to Rs 1,018 crore and Rs 1,146 crore respectively, Kinetic just managed to double its turnover. A major reason for this was the fact that Kinetic seemed to have missed the pulse of the market, which was fast moving towards motorcycles...

Excerpts >>

2] Established in 1948, Honda Motor Co. Ltd., was one of the world's leading automobile manufacturers. Globally renowned for its light and utilitarian motorcycles, Honda had over 77 production facilities in 40 countries and sold its products in over 150 countries.

3] 1981 figures.

4] Hero Honda Motors Ltd. was a 50:50 joint venture between the Hero Group of India and Japanese automobile giant Honda Motors. Formed in 1984, the company was India's biggest player in the motorcycle segment.


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