In 1983, Hero Cycles of India signed an agreement with Honda Motor Corporation, forming Hero Honda. This agreement, between an Indian firm that got its start making bicycle parts, and the world’s largest motorcycle manufacturer, marked Honda’s entrance into the Indian market for motorized two-wheeled transportation. While the country was already crowded with competitors such as Suzuki, Yamaha, LML and Kinetic, Honda’s executives and Hero’s founder and CEO, Brijmohan Lall Munjal, saw significant potential in the Indian two wheeled market.
Why was the market attractive?
At first glance, the Indian market was attractive because of its sheer size and significant growth. India boasted a population of approximately 725 million in 1983, growing at a rate of 2.2 per cent per year. At that rate of growth, the Indian population was expected to grow by 163 million people in the 1980s and to surpass 1 billion people by 2000. Not only was the total population of India enormous, but Munjal also knew that the adult age group most likely to purchase two-wheelers (15–65-year-olds) was expected to grow to over 500 million by 1990 and to an estimated 695 million by 2005.
But why would one want to pursue a market where 35 per cent of the population was impoverished? Mitigating this fact was growth in the purchasing power of the Indian population, expected to grow per capita by 5.2 per cent between 1983 and 1993. Furthermore, even in the early 1980s, the country was wealthy enough to support an infrastructure of 1.4 million kilometres of highway. In total, Munjal saw that