It was February 2012, when Hero MotoCorp announced that they have formed a partnership with US based sports motorcycle manufacturer, Erik Buell Racing. The key points of this partnership were:
– Get design and technology from EBR
– Launch high-end sportsbikes in India
– Augment capabilities through multiple alliances
– Team Hero to race 1190RS superbikes at AMA Pro Racing Superbike Championships in the US
Today, 16th April 2015, effective immediately, Erik Buell Racing has filed for bankruptcy and ceased all their operations, including that of their subsidiaries (even their website is not working anymore). This news, has a direct effect on Hero MotoCorp, whose share price on the National Stock Exchange are about 4% in the red for the day.
Hero MotoCorp not only loses the $25 million (Rs 156 crores) which they invested in EBR back in 2012 (buying 49.2% stake), they also find themselves at a dead-end with most of their future plans, which heavily relied on this alliance with EBR.
For eg, their plans of launching Hero motorcycles and scooters in the US via the EBR network, and launching superbikes in India using EBR expertise in design and technology; including Hastur and HX250R (both were showcased at the 2014 Delhi Auto Expo). (P.S. The new Karizma ZMR design has been heavily inspired by EBR motorcyles).
A brief history about Erik Buell Racing
Erik Buell Racing (originally Buell Motorcycle Company) was founded by ex Harley Davidson designer, Erik Buell in 1983. In 1993, Harley bought a 49% stake in the company, and by 2003, BMC was a completely owned subsidiary of Harley Davidson. Later in 2009, Harley Davidson decided to sell this company, as they wanted only to focus on brand HD. It is at this juncture, Erik Buell took over and in 2012, Hero MotoCorp came on board.
Why filed bankruptcy
Competing head on with established Japanese and European brands, Erik Buell Racing sales figures dipped considerably.
Company owner, Erik Buell said (in reference to Hero MotoCorp’s investment); “The turn we recently took, after we thought we were moving forward, was unexpected. We thought we had secured funding, but in the end, we were not able to get the funding in place. Therefore we need to do the best we can under the circumstances for all parties in interest.”
The company has over $20 million in outstanding liabilities and has sought court protection from its creditors.
What happens to Hero MotoCorp
Hero joining EBR was probably the best move forward by Hero MotoCorp, especially post Honda’s departure. Now with EBR gone, Hero MotoCorp has some quick thinking to do as their closest rival, Honda Motorcycle and Scooter India, are fast catching up.