UPDATE 1-India's Hero MotoCorp signs deal with European company

Thu Sep 6, 2012 6:42am EDT

(Adds quotes, details)

By Henry Foy and Anurag Kotoky

NEW DELHI, Sept 6 (Reuters) - Hero MotoCorp Ltd, the world's largest maker of two-wheeled vehicles, has signed an agreement with a European design and technology partner, Managing Director Pawan Munjal said, its third partner since its split from Japan's Honda Motor Co.

The Indian firm will announce the name of its new partner soon.

Last year Hero ended a 26-year joint venture with Honda Motor, a move that allowed it to explore new products and export opportunities in markets where the Japanese company has a presence.

"This company has end-to-end capability in all kinds of two-wheelers," Munjal said, referring to the new partner, adding that it boasts expertise in engines, hybrids and electric bikes. "It is somebody from Europe."

In February, Hero announced a partnership agreement with U.S. superbike company Erik Buell Racing, and in March signed a research deal with Austrian engine manufacturer AVL.

Munjal said Hero plans to buy stakes in its technology partners.

"It's a long-term arrangement, and there is every likelihood that sooner rather than later we will financially get involved in these companies," said Munjal, speaking at an automotive industry conference. "To start with, a minority stake."

Hero, which exports its vehicles to Sri Lanka and Bangladesh, plans to start selling them in Guatemala by October and in Nigeria by November or December, Munjal said. It also wants to start sales in Myanmar, he said, without giving a timeline.

Hero sales fell 11.9 percent year-on-year in August as the company and its local rivals Bajaj Auto and TVS Motor faced greater competition from Japanese manufacturers such as Honda.

High interest rates in a country where most consumers borrow money to buy vehicles, in addition to high petrol prices, have also dampened demand for cars and two-wheelers this year.

Munjal said Hero has reduced production due to the current slowdown, without giving details, but he expected retail sales to pick up in October, when Indians traditionally begin to make big purchases for the festive season. (Editing by Daniel Magnowski)

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