After parting ways with the Munjals at Hero Honda, it looks like Honda Motor Corp may go it alone in its car business as well.
The Japanese auto giant makes cars in India through a 17-year old joint venture, Honda Siel Cars India, with Shriram Industrial Enterprise (Siel). The latter has a minority 5% stake in the J-V.
The two partners are reportedly not seeing eye-to-eye over future investments, and SIEL is in talks to opt out of the JV.
“There is a thinking within Honda that they need to invest heavily in India in the coming years to stay abreast with the market, but as a minority player Shriram is not as interested in future investments,” said an analyst partly involved in the talks. “Discussions are on with regards to the valuation of Shriram’s stake.”
Honda recently invested around Rs 1,200 crore through a rights issue to fund the expansion at its second plant at Tapukara, Rajasthan. It is also toying with the idea of an engine factory where its diesel engines could be assembled. It was not clear whether Shriram participated in the issue.
“India is definitely among the key markets for Honda, and HSCI is committed to this market with ambitious growth plans,” the company said.
Siel chairman Siddharth Shriram could not be contacted for comments.
Honda Siel posted a net loss of Rs 35.31 crore in 2009-10, which widened to Rs 212.83 crore in 2010-11 due to component shortage for a major part of the last financial year. Losses are expected to pile up further in 2011-12, a torrid year for the company due to natural disasters in Japan and Thailand.
The firm however said it cannot be termed sick under law.