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Yamaha hits the sweet spot with premium bikes; scooters sputter

Murali Gopalan | Updated on May 23, 2019 Published on May 23, 2019

Company will be hoping to showcase its competencies in BS VI emissions era

Yamaha Motor continues to see good growth in its premium motorcycles though scooters have not been keeping pace.

“Our sales are growing in the premium segment, particularly in sports models, but we have not achieved growth in the scooter segment due to this being the product transitional period before the 2020 emission standards take effect,” the top management said in a recent Q&A session with analysts in Japan.

Yamaha has said that it is continuing with development of models compliant with the new emission regulations. The good news is that with strong sales happening in the higher priced range, sales and income have exceeded targets.

Missed target

“On the other hand, the target for scooters was a small increase in unit sales, which was not met,” conceded the Yamaha management. The company has indicated that with the slowdown in GDP growth and braking regulations, total demand in India fell by 9 per cent compared to the previous fiscal year.

Incidentally, in the neighbouring ASEAN region, sales of Yamaha’s premium models in Indonesia continue to be more solid than forecast. Vietnam, Taiwan, and Argentina, etc, decreased compared to the previous fiscal year.

Sales of the Nozza Grande have not progressed as the market launch has taken some time since its announcement at the end of last year. Yamaha is “actively taking” sales promotion initiatives and plans to launch new models in the future while “aiming for the next step in sales expansion using those models as leverage”.

It is also quite clear that ASEAN will reach a saturation point in the coming years, which means India will be the centre of attention for Yamaha. The company still continues to be a marginal player here compared to the overwhelming presence of Hero, Honda, TVS and Bajaj. It is also up against stiff competition from Suzuki and Royal Enfield.

However, there is a clearer strategy in place now with the focus being on premium bikes and scooters while steering clear of the commuter space. The new India group chairman, Motofumi Shitara, has reiterated that it is important to convey the Yamaha brand DNA message to customers and this is where the new corporate campaign, ‘The Call of the Blue’, will have a big role to play.

It was also less than a week ago when the Indian arm reached a total accumulated production volume of 10 million units. While the number may look impressive initially, it is really not much to write home about especially when the likes of Hero and Honda posting combined sales of over 13 million units each year.

Lost opportunities

In contrast, Yamaha’s milestone has been attained after nearly 35 years, which clearly points to a story of many opportunities lost. When it entered the country then as part of the Japanese motorcycle blitzkrieg, the initial response was heady. Thereafter, things just went downhill with the Escorts partnership not working according to plan and Yamaha eventually went on its own.

Despite this change in status, it was clear that the company did not quite have a product strategy in place. Perhaps, the fact that it had lost out valuable time caused Yamaha to join the commuter motorcycle bandwagon and launch models in this space. There was no way its offerings were going to make a difference as customers queued up at (the then) Hero Honda showrooms.

It was only during the earlier part of this decade when the Japanese two-wheeler maker threw its hat into the scooter ring and the volumes began coming in. By this time, the leadership in Japan had identified India as one of its key growth pillars not only from the viewpoint of market size but a competent sourcing hub for components, which could be supplied worldwide.

Further, headquarters was keen that India double up its responsibilities to cater to the African market. The idea was to produce entry-level commuters from the new plant in Chennai. However, markets like Nigeria began to experience severe volatility at this point and the plan was effectively put on hold.

The challenge on hand now was to boost volumes in the Indian market and it was at this point in time that the focus firmly shifted to premium bikes and scooters. It was clear that the Fascino had made a mark for itself in the scooter space and, likewise, for motorcycles, it made more sense to look at the premium space comprising the FZ range, R15 and the likes of the recently launched MT 15.

Main focus

The Yamaha leadership team in India is now quite categorical that its calling card will be premium pretty much on the lines of what fellow Japanese company, Suzuki, is doing with its own bikes and scooters. Yamaha also has a great opportunity to establish its technological strengths when the era of Bharat Stage VI emission norms kick in from April 2020.

The challenge, of course, is to balance out the costs invested in fuel injection and yet remain accessible to customers in this price-sensitive market. Honda has already made known that it will use the BS VI era to showcase its strengths as a top player, which could also help it surge ahead of former ally, Hero.

Yamaha knows only too well that it is going to be a long haul ahead in India. Yet, there are some interesting changes happening in the mobility landscape, which will give it greater confidence in terms of building its brand. For instance, the tie-up with Hero Cycles for electric bicycles is one important step in this direction.

It also remains to be seen if Honda and Yamaha extend their partnership in Japan for sub-50cc scooters to new areas like e-mobility. For now, there is no indication if anything will happen but the spate of consolidation now taking place in the Japanese automotive industry could throw open a host of possibilities.

Further, the Big 4 in Japan’s two-wheeler space — Honda, Yamaha, Suzuki and Kawasaki — have decided to come together as part of a consortium to explore new standards for batteries, changing infrastructure, etc, in the new era of electric. For now, this will be confined to Japan but there is no telling how this four-way alliance will be leveraged in a market like India, the world’s largest in two-wheelers.

Published on May 23, 2019
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