Owing to an unpredictable yen, India will be a procurement base for parts to be used for Yamaha’s global operations.

It’s not easy for companies such as Yamaha Motor to recover lost ground in India after a roaring start that gave way to competition from aggressive local and global players.

The Japanese bike maker was one of the biggest draws in the market during the heady 1980s, which also saw the entry of Suzuki and Honda. It was the best bet for youngsters who loved Yamaha’s power and styling. Things were looking good for some years till the script went completely awry.

Yamaha and its local ally, the Escorts group, decided to part ways in the late-1990s and for a good decade after that, the company just lost all connect with the customer. In the meantime, Hero Honda had taken over the top slot from Bajaj Auto where its commuter motorcycles made the gearless scooter irrelevant almost overnight.

The other Honda arm, HMSI (Honda Motorcycle & Scooter India), had broken up with Kinetic and was getting set for its own gearless scooter onslaught.

In this milieu, Yamaha seemed lost for a solution and its divorce with Escorts pretty much left it isolated in a competitive market.

It should have perhaps stuck to its core competence of making powerful bikes (which was a game-changer for Bajaj Auto in 2001 when it launched the Pulsar) but got into the volumes game instead. Hero Honda ruled the roost here and there was no way customers were going to opt for anything else.

It took Yamaha some years to figure out that it made more sense to work on its strengths of manufacturing powerful bikes while getting the numbers from gearless scooters which have been growing at over 20 per cent annually. In addition, changing global dynamics have ensured that India will get a bigger role in the Yamaha roadmap.


The country will now double up as an important procurement base for parts which will be used across the Japanese automaker’s global operations.

Along with Japan, China and ASEAN countries, India will be a key part of this cost-control exercise where Yamaha plans to shave off Rs 5,000 crore this year alone.

Clearly, things are getting difficult back home in Japan thanks largely to the unpredictable yen which has made life difficult for all automakers. From now, Japan’s role will be confined to technologies while Yamaha’s global operations will have a bigger role to play in product development.

In the short-term, this will be confined to the company’s ASEAN integrated development centres but it is only a matter of time before India is included, too.

Yamaha has already identified Africa as the next growth driver. The preference here is for cheap motorcycles and this is where India’s strengths as a competitive cost base will play a big role.

Bikes for Africa will be made in India and, perhaps, even sold here if the market is inclined towards options costing less than Rs 30,000.

Interestingly, Bajaj Auto is using China as a base to tap the African market with its Boxer motorcycle as costs are more competitive than India.

However, issues relating to IPRs (intellectual property rights) continue to be a challenge for automakers doing business in China which could have perhaps influenced Yamaha’s decision.

The company is seeking to also use the India base to make top-end bikes and scooters for exports to the ASEAN region and even back home to Japan where costs are spiralling out of control.

As the momentum picks up during the course of this decade, India could well become Yamaha’s top market even though its annual volumes at a little over 500,000 units are a tenth of the numbers in Indonesia, Thailand and Vietnam.

Yamaha now plans to strengthen its R&D base in India to ensure quicker rollout of products for the local market as well as Africa.

This is not the case now; Japan decides the way forward, as with the Ray gearless scooter, which debuts in India shortly.


For the moment, Yamaha’s projections for the country are modest at one million units by 2015 of which 20 per cent will be exported to Latin America and Asia.

Compare this with Hero MotorCorp which is already clocking over six million units or Bajaj Auto at over 4.5 million units. Honda is rapidly heading towards the three-million-unit mark and looking at 10 million bikes and scooters by 2020. So, where does this leave Yamaha in the leadership stakes?

There is no question that the present rankings will continue for some years. Hero MotorCorp is not going to cede its top slot in a hurry even though Honda is going flat out with new facilities being planned across the country.

Yamaha will have to play to its strengths in powerful bikes and gearless scooters while using India to service its global operations.

After all, a traditional scooter player such as Bajaj Auto has chosen to exit the space and focus on motorcycles. Its reasoning is that it only has a ten per cent share of the world bike market and would rather build a stronger base here rather than take a detour to scooters.

Companies such as Yamaha are also beginning to figure out that it makes more sense to focus on profits rather than spread themselves thin while going after market share.

As in the car industry where consolidation is the name of the game for survival, two-wheeler companies are also forging new alliances.

Hence, KTM of Austria now has an affordable production base in India thanks to its largest shareholder, Bajaj Auto, while BMW Motorrad, the motorcycle brand of BMW, is looking at a similar model (no equity, however) with TVS Motor.

(This article was published on August 2, 2012)
XThese are links to The Hindu Business Line suggested by Outbrain, which may or may not be relevant to the other content on this page. You can read Outbrain's privacy and cookie policy here.