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Yamaha to focus on generating more sales growth

Murali Gopalan | Updated on January 08, 2018

India is expected to lead Yamaha’s two-wheeler business. A view of its Oragadam plant near Chennai   -  Bijoy Ghosh

New CEO, Yoshihiro Hidaka, will have India on his radar

Yoshihiro Hidaka clearly believes that Yamaha Motor will have to step on the gas in its sales growth. This thinking comes through in his message to shareholders in his capacity as the new President & Chief Executive Officer.

“While profitability has improved, issues remain with sales growth not materialising,” says Hidaka. “One of our major tasks moving forward is to create momentum and pave the way for sales growth, while maintaining and enhancing our strengthened financial resilience and corporate foundations.”

He took charge on January this year from Hiroyuki Yanagi, who was a familiar face in India and had gone all out to ensure its role in the Yamaha global roadmap. Hidaka will be doubtless keen to continue the story given that India is the world’s largest two-wheeler market.

From Yamaha’s point of view, it is in the third place after Indonesia and Vietnam but growing a lot faster overall in the two-wheeler arena. There is every likelihood that its Indian operations will overtake Vietnam by the end of 2018 and surge ahead of Indonesia by 2020.

This is not entirely surprising given that the ASEAN region has reached a stage of maturity in its two-wheeler business where growth will now be flat in the coming years. This is in sharp contrast to India, which has the potential to grow by over 10 per cent annually over the next few years.

Tough competition

Yet, Hidaka’s concern on sales growth may not be misplaced considering that Yamaha is up against stiff competition in this part of the world and needs to live up to its potential. Growing numbers in the domestic market will be top priority and it is here that the company will have its work cut out. While Hero and Honda are way ahead of the rest, there is tough competition to reckon with in the form of TVS and Bajaj.

Royal Enfield is also clocking over 65,000 motorcycles every month and could build a bigger lead if Yamaha does not step on the gas. Likewise, Suzuki could be trailing now but is working overtime to get its India house in order, which will also see a second plant being commissioned in the South.

The good news is that Yamaha is a stronger company today that can leverage its resources quite comfortably. “Since the global financial crisis, we have continued to improve our financial resilience and strengthen our corporate foundations,” says Hidaka. “As a result, we have achieved significant improvements in these two key financial areas.”

In addition, Yamaha has also been “working to balance growth strategies and profitability improvements” as part of the current medium-term management plan, which ends in end-2018. In the meantime, it is also getting increasingly clear that the world mobility landscape is changing rapidly that also explains why the company has reorganised its management structure with added emphasis on key areas like mobility, procurement and, of course, motorcycles.

“In a business environment undergoing rapid changes in electric mobility technology and the Internet of Things, we are working on initiatives to quicken our responsiveness and reduce the lead time to address the opportunities and challenges we currently face,” continues Hidaka.

New strategies

India will be a core part of these priority areas and it remains to be seen how quickly headquarters in Japan will act in ensuring that it gets into the new role proactively. Beyond selling bikes and scooters, the country is also an important sourcing point for components, which head out to Yamaha operations worldwide.

This is only natural considering that India has a robust ancillary supplier base, which has built its strengths in cost-competitiveness and quality over the years. Almost every major vehicle makers has tapped these competencies for its global needs.

Yamaha has also wanted India to take the lead in servicing African nations, which have been identified as the next big growth engines for motorcycles. Things, however, have not quite worked out to plan following the recent bout of economic volatility in Nigeria though things are now limping back to normalcy.

It will be interesting to see how Hidaka goes about generating more energy for the operations here and ensure that it does not lose momentum in an intensely competitive scenario. Will this be accompanied by some restructuring too given that Yamaha has different entities for manufacturing, sales and R&D?

“There is no reason to have separate companies within the brand with exclusive heads for each of them,” says an industry observer. “It only creates islands within teams when the better option is to have everyone working in unanimity towards one goal.”

Yamaha created these entities with a specific purpose some years ago and, in all fairness, they could just be working to a plan. However, the truth is that with two plants and different teams spread across Delhi and Chennai, it may just make more sense to look at greater convergence.

Till then, Hidaka will be busy plotting the next phase of the company’s growth strategy, which will, in all likelihood, be articulated in the next medium-term management plan. New challenges like mobility and even strengthening the alliance with Honda could just be part of the vision statement that will unfold in 2019.

Published on January 04, 2018

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