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Frail Indonesia puts Japanese focus on India

Updated on: Aug 06, 2015
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Yamaha, Honda 2-wheeler sales slump in their largest market while India stays strong

It was less than six months ago when Yamaha Motor projected sales in Indonesia to be in the region of 2.5 million units in 2015. This is traditionally the company’s largest market followed by Vietnam and, of late, India which is quickly doubling up as a global manufacturing hub.

Earlier this week, Yamaha made known at its second quarter results in Japan that numbers in Indonesia would be only two million units, down by nearly 25 per cent from the earlier projections. Vietnam was projected to be its second largest market in 2015 with annual output of seven lakh units with India in third place at 6.21 lakh units.

Yet, it is the rapid fall in Indonesia’s two-wheeler market that has been alarming. Honda, likewise, indicated at its recent investor presentation that its first quarter (April-June) motorcycle sales had fallen by 5.7 per cent to 4.1 million units thanks to setbacks in Indonesia and Brazil.

In the process, it is only natural for both Japanese brands to renew their focus on India which continues to be brisk for two-wheeler sales even while entry-level motorcycles are facing headwinds in rural markets. This, in turn, is the result of erratic weather patterns that have taken their toll on farm income though companies are confident that this a transient phase which will pass over soon.

Behind the scenes The bigger question though is the reason for the slump in Indonesia, traditionally the largest market for both Honda and Yamaha. “This is part of a cycle with its ups and downs. There is no telling when the market will revive but till then it is going to be tough for two-wheeler companies,” says an industry expert.

International news reports indicated early this week that Indonesia’s economic growth had dropped to its lowest level in six years at 4.6 per cent. This, they added, was a result of the slow pace of infrastructure development where the Government needs to increase its overall spending. It now remains to be seen if there will be a turnaround in the second half of the year as this, in turn, will depend on an upward movement of commodity prices.

Till that happens, companies like Honda and Yamaha will have to just wait for their favourite hunting ground to stage a quick revival. Things have not been so great in most parts of the ASEAN two-wheeler arena which only puts the importance of India in perspective.

To get a better idea of the slump, Yamaha’s two-wheeler sales in Indonesia fell to 9.2 lakh units in the first six months of this calendar. This is in sharp contrast to levels of 1.3 million units and 1.28 million units recorded in the same timeframe during the preceding two years.

Next big thing Other ASEAN markets like Thailand, Vietnam, Malaysia and the Philippines have remained steady for Yamaha and some have even seen an increase in sales. The overall region accounted for numbers of 1.5 million units in April-June, a sharp fall from 1.87 million in the first half of 2014 and 2.04 million units in ‘13.

As for India, Yamaha reported sales of 3.33 lakh units in the six month period which was a tad lower than 3.48 lakh units recorded in 2014 but still higher than 2.86 lakh in ’13. Yamaha, however, hopes to wrap up the year with 6.21 lakh units which will mark a ten per cent jump from the previous year’s tally of 5.67 lakh units.

In the case of Honda, sales in Asia fell to 3.57 million units from 3.76 million in Q1 thanks largely to Indonesia even while India was doing brisk business. Japan stayed flat at 47,000 units while Brazil reported a fall in business too. In this backdrop, Honda would have reason to feel upbeat about India which is slated to become its largest market, ahead of Indonesia, by 2016-17.

By that time, the company hopes to have nearly six million units of capacity in place from its four plants. Scooters are expected to account for nearly two-thirds of this output thanks to the Activa brand which is fuelling sales of over two lakh units each month. Honda has not had the same success with its motorcycles thus far but will have no cause to complain as customers are rapidly moving to scooters.

As for Yamaha, it believes India will have to wait till 2020 before it claims the top market status from Indonesia. The company has only recently commissioned its new plant in Chennai which will take its overall capacity to nearly three million units by ’18. India will, however, have an added responsibility in servicing Africa which has been identified as Yamaha’s next growth region.

Published on January 23, 2018

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