Yamaha keen to rebuild India innings with right products

The media did not get around to meeting Yoshihiro Hidaka during his recent visit to India. The President and CEO of Yamaha Motor Company, however, spent time with his dealer fraternity in Bengaluru soon after the launch of the 150 cc FZ-F1 and FZS-FI sports model motorcycles.

For Hidaka, the meeting was clearly important to drive home the message that India was critical to the company’s long-term plans. It is precisely a year since he has taken over as CEO and it was only a few weeks ago when the medium-term management plan for 2019-2021 was unveiled.

Hidaka made it clear that India would be a significant component of this plan, which is only obvious given that it is the world’s largest producer of motorcycles and scooters with over 21 million units in 2018. However, Yamaha is still a marginal player in this arena and well behind Hero, Honda, TVS and Bajaj while up against strong competition in Suzuki and Royal Enfield.

Premium motorcycle focus

The launch of the new FZ range in Bengaluru marks a clear intent to focus on premium motorcycles (and scooters) instead of making needless detours to other segments. As Yamaha has articulated in its global website, the FZ-FI has been developed under the concept of ‘Urban Fighter’ appealing mainly to “power hungry young Indian men in their twenties who are particular about style and masculinity as they ride throughout the city streets”.

This is India’s GenNext who are now queuing up for premium offerings, which in turn explains the rapid rise of Royal Enfield in recent times as well as the heady response to Jawa, which will hit the roads next month. Yamaha has also realised that it makes more sense to focus on its core DNA instead of being distracted with offerings in the commuter space.

The company has targeted production of 1.2 million units in India by 2021 when the medium-term management plan will have drawn to a close, up from 7.8 lakh units in 2018. It has estimated annual production of the FZ at three lakh units and this will be an important part of the revival plan for India.

This was the core of Hidaka’s message to Yamaha dealers where he spoke of new launches in motorcycles and scooters over the next five years. These would reflect the ‘unique style’ of the Japanese brand intended to make a strong connect with India’s youth base.

Future mobility options

Beyond this, Yamaha will look at a host of mobility options globally for the future where India may also be part of the changing dynamics. A start has already been made with e-bicycles where the headquarters in Japan has tied up with Hero cycles. It also remains to be seen if other mobility options like the three-wheeled Tricity will make their way to India in the coming years.

Clearly, electric will be a big part of the global play and with the Indian government keen to push this in a big way, Yamaha will be keen to throw its hat into the ring. As part of its mobility mission, the company has evolved a new term called ART which, when expanded, stands for Advancing, Rethinking and Transforming.

While there is clearly a lot of action planned in the coming decade, Yamaha will be keen to put its India house in order first. The country is not unfamiliar territory for sure considering that it has been around for over three decades. Yet, it just has not been able to crack the code for a variety of reasons.

Reboot

Now with a new leadership structure in place in India coupled with a determination to stay true to its core competence, Yamaha is now rebooting its innings. It is also reasonably confident that it can leverage its skills in the Bharat Stage VI emissions era, which comes into effect from April 2020.

If the company decides to get its costing math right with the expensive fuel injection technology, it can showcase this prowess to Indian buyers. From a business perspective, this will also enhance the important of India in the Yamaha global map where the competencies built for BS VI can be leveraged to meet the future needs of other global operations.

During a recent Q&A session with analysts in Japan, Yamaha explained why the new medium-term management plan was critical going forward. “The fact that we could not achieve our net sales target of two trillion yen with an operating income of 180 billion yen in the current medium-term management plan has fed into the new plan. We plan to take up the challenge once more to deliver the top line improvements we previously have not achieved,” stated the company.

From its point of view, aiming for such goals was feasible after calculating the contributions from each business, such as developing markets like India and Indonesia, developed markets, marine, and robotics. In the ASEAN region, according to Yamaha, the income ratio is forecast to increase slightly, but in India, given the budgeted costs for compliance with emission standards, the income ratio will not be high.

The company also expects growth of around 1.4x in the Philippines market overall. “Scooter sales in the Philippines are currently healthy, and we want to build on the high prices and income ratio we are achieving. We particularly want to focus on the emerging middle class, a segment which we are strong in,” it said.

Yamaha anticipates 1.4x growth in the ASEAN region emerging middle class (households with an income level of $5,000 to $35,000). This class numbers 90 million households, and how to grow sales to them is “a major topic for us to address”.

Interestingly, Yamaha also made known that it was putting the commercialisation of regular passenger vehicles on hold for now. It had arrived at this decision after giving careful consideration to the automotive business from two perspectives.

The first was the mass production of automobiles in the unique style of Yamaha with technology its competitors cannot match while also exceeding safety standards. The second related to which types of products could be launched into which markets.

After careful analysis from both perspectives, Yamaha arrived at the conclusion that recouping investment would not be simple and put the automobile plan in the backburner for now. Whether it will contemplate reviving it sometime in the future remains to be seen.

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