Background

On October 10, 2023, the CCI approved a Proposed Combination which consisted of, (i) acquisition of 20% voting rights in Hitachi Astemo Ltd. (‘HAL / Target 1’) by JICC-01 Limited Partnership (‘JICC / Acquirer 1’), together with certain control rights, board representation and other rights, (ii) acquisition of an additional six point six per cent voting rights in HAL by Honda Motor Co. Ltd. (‘HMCL/ Acquirer 2’) such that voting rights of HMCL in HAL will increase from 33.4% to 40% and, (iii) acquisition of 49% shareholding in Hitachi Astemo Electric Motor Systems (‘HAEMS/ Target 2’) by HAL, such that 100% of the shareholding of HAEMS is held by HAL (‘Proposed Combination’). ^[1]

Parties to Combination

Acquirer 1: JICC is a Japanese limited partnership, managed by JICC G.K., a wholly owned subsidiary of JIC Capital, Ltd. JIC Capital is a wholly owned subsidiary of Japan Investment Corporation (‘JIC’).  JIC, founded in 2018, is a sovereign wealth fund of the Government of Japan. Its purpose is to generate a virtuous cycle of risk capital to support next-generation industries in Japan.

Acquirer 2: HMCL is a limited liability, joint stock corporation incorporated in Japan. In India, HMCL is largely engaged in activities such as manufacture and sale of automobiles, two-wheelers, power products, auto parts, related research, and development, etc.

Target 1: HAL was incorporated in 2021 by merger of Hitachi Automotive Systems Ltd., Keihin Corporation, Showa Corporation, and Nissin Kogyo Co., Ltd. In India, HAL is largely engaged in manufacture of auto parts for automobiles and two-wheeled motor vehicles, and related research and development.

Target 2: HAEMS, previously known as Hitachi Automotive Electric Motor Systems, is a company incorporated in Japan. It is engaged in the development, manufacture, and sales of motors for electric vehicles.

Relevant Markets and Overlaps

The parties notified that there were existing vertical relationships between HAL group and HMCL group. HMCL and HAL had entered into standard supply arrangements for the supply of certain products such as Engine Control Units (‘ECU’), front forks, calipers, throttle bodies and fuel pumps for two-wheelers and Intake manifolds for automobiles by HAL to HMCL. The exact delineation of the relevant market was left open as there were no horizontal overlaps However the CCI noted the following vertical overlaps:

i.    Upstream Market(s): Market for ECUs for two-wheelers in India (‘Upstream market 1’); Market for front forks for two-wheelers in India (‘Upstream market 2’); Market for calipers for two-wheelers in India (‘Upstream market 3’); Market for throttle bodies for two-wheelers in India (‘Upstream market 4’); Market for fuel pumps for two-wheelers in India (‘Upstream market 5’); and Market for intake manifolds for passenger vehicles in India (‘Upstream Market 6’). (Collectively ‘Upstream Markets’).

ii.   Downstream Market(s): Market for manufacture and sale of two-wheelers in India (‘Downstream market 1’) and Market for manufacture and sale of passenger vehicles in India at the downstream level (‘Downstream market 2’). (Collectively ‘Downstream Markets’).

Competitive Assessment

The CCI approved the Proposed Combination concluding that it will not have any appreciable adverse effect on competition in India inter alia for the following reasons:

i.    In the Upstream Markets, the CCI noted that the combined market shares are in the range of [40-50%] in Upstream Market 1, [5-10%] in Upstream Market 2, [30-35%] in Upstream Market 3 and [50-55%] in the Upstream Market 4 and 5; and the market share in corresponding Downstream Market 1 is in the range of [20-25%]. Further, the market shares in Upstream Market 6 and in corresponding Downstream Market 2 are in the range of [0-5%]. It was noted that the aforesaid market shares arise in relation to existing vertical linkages which have been in operation prior to the Proposed Combination and would have continued even if the Proposed Combination had not taken place; and

ii.   Further, pursuant to the Proposed Combination, there would be an increase of seven per cent voting rights of HMCL, an existing shareholder of HAL, such that its voting rights in HAL would only increase from 33.4% to 40%, without any additional rights.

Considering the above, the CCI noted that there appears to be no appreciable adverse effect on competition in India and thus the CCI approved the transaction.

[1] JICC-01 Limited Partnership, Honda Motor Co., Ltd., and Hitachi Astemo Ltd. (Combination Registration No.C-2023/08/1049).