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BEST OF B&E 2011 "YAMAHA: GROWTH STRATEGY – PUBLISHED IN B&E ISSUE DATED SEPT. 29, 2011"
Yamaha: Can it fire on all cylinders?
The Japanese bike maker plans to take its sales in India to a million bikes in another two years, but its ambition could come a cropper if it fails to rack up volumes in the base segment.
Issue Date - 19/01/2012
 
Ask Hiroyuki Suzuki, MD & CEO, India Yamaha Motor, about his plans of relaunching the once iconic RX100 brand in India and you find his face crease into an impish smile. In case you haven’t caught on and are still waiting for more pronounced cues, he goes on to gently shake his head. For legions of bike lovers, during the 1980s and the ’90s, the RX100 was the hottest bike in town, and the brand continues to evoke a warm nostalgic memory even 15 years after it went off the shelf.

However, a lot of water has flown under the bridge since Yamaha took the RX100 off its production lines. Subsequent models like RXG, RX-135 and RXZ failed to live up to the promise generated by the superb RX100. While these brands failed to make a splash, competitors like Hero Honda and Bajaj Auto kept relentlessly jockeying up their market share. Around 2006, things had turned downright bleak for the Japanese bike maker and it was losing money by the barrel. As per various market reports around this time, Yamaha incurred losses to the tune of Rs.10 billion in the last six years and it was seriously considering pulling out of India altogether. But thanks to its heady success earlier, Yamaha’s Japanese headquarters decided to give the second-fastest growing market in Asia a second shot.

In 2007, soon after launching superbikes like R1 & MT01 in the Indian market, Yamaha turned to what it is best known for – making motorcycles that are technologically ahead of their times in terms of styling, performance and features. Products like R15 and FZ series were launched in the Indian market. Their initial success spurred Yamaha to continue with its game plan of introducing models that successfully attract the Gen-Y biker. As a result, in subsequent years, Yamaha launched products such as Fazer, FZ-S, SZ-R and others. Today, the company sells 14 models in the Indian market and claim that it has over 15% market share in the premium motorcycle segment. The overall market share of Yamaha in India is just around 3% even today, but considering the intensified competition in the Indian two-wheeler segment, the comeback plan has worked well for the company so far.

Continuing with its quest to pump up sales, Yamaha posted a growth of 32% in domestic sales during August 2011 as compared to its sales in August last year. The company registered sales of 29,934 units in August 2011 as against 22,683 units in the same month last year in the domestic market. The overall sales recorded were 39,490 units in August 2011 compared to 30,461 units in August 2010, a growth of 30%. But Yamaha is hungry for more and is making redoubled efforts to push its sales further. MD Suzuki claims that Yamaha will be able to tot up sales of 530,000 units in 2011 out of which around 360,000 units will be sold in the domestic market while it is looking to export over 170,000 units. Next year, the company’s target is to sell over 650,000 units and scale it up to a million by the end of 2013.

So what’s fuelling Yamaha’s ambitions? A major propellant is its desire to expand its market share in the premium segment. Then there’s the much-awaited entry into the two-million-strong scooter segment in India, which Yamaha wants to step into but not before its bike business is fully anchored and on a solid footing. If things work out according to plan, Yamaha will launch its scooters next year. It is expected that the scooters will also carry the Yamaha DNA of being sporty and technologically forward-looking. While its success in the scooter segment is too early to predict, Yamaha’s ambition of clocking a million units in bike sales admittedly looks like a stretch at the moment.

 
Intense competition in the performance biking segment (150cc and above) led by Bajaj Auto and market leader Hero MotoCorp (recently renamed from Hero Honda) may not allow Yamaha to meet its set target of sales and market share this year and the next. Last year, sales of Hero Honda grew by nearly 16% to five million units, while that of Bajaj Auto increased by 58% to 2.34 million units as compared to 2009. In comparison, Yamaha’s market share shrank marginally to 2.29% last year from 2.52% in 2009, even though the company had claimed during the year that it aimed at reaching a 10% market share target by the end of 2010. Analysts say that while Yamaha brought itself back out of nowhere two years ago and has since kept generating volumes with the help of new launches, its growth has been much below expectations. This could be because of Yamaha’s absence from the voluminous entry-level segment of 100cc bikes, where Hero Honda and Bajaj enjoy an upper hand.

On its part, Yamaha is leaving nothing to chance. The company’s marketing team has been diligently at work to reinforce the brand’s image and trust among vendors, dealers and, most importantly, consumers. In order to gain customers’ confidence and win their trust, the company has even been sourcing genuine RX100 spare parts for its consumers in the country. In fact, the company has already made a Rs.2 billion investment towards sprucing up its distribution and ramping up its operations in the country and will be investing an additional Rs.5 billion to increase the capacity to one million units at its Surajpur factory, which is currently capable of producing 6,00,000 units per annum. The company is also focusing on growing its reach and penetration level in India further. It is increasing its customer touch points to 1,200 by the end of 2011 from 1,000 currently. The company even has a plan to turn all its dealerships to a Yamaha Bike Station (a modern & trendy 3S dealership) by the end of 2014. The idea is not just limited to increasing sales of products like YZF-R15, FZ series and SZ series but to also create the groundwork for the success of the upcoming scooters.

Still, despite all these years of its operations in India, Yamaha has not been able to grow in all segments of the motorcycle category and enjoys only a miniscule presence in the entry-level commuter segment that generates the maximum volumes in the Indian market. Out of the total four million motorcycles sold in India during the April-August period this year, around three million were sold in the 75-125cc segment. But rather than growing its base in this segment, Yamaha’s sales have bottomed to 24,134 units in April-August 2011 as compared to 33,011 units sold in the same period last year. Yamaha is currently selling products like SS125, YBR 125, YBR 110 and Crux in the entry-level segment and there is a need to launch a sporty yet economical and fuel-efficient product in this category. “Yamaha needs to increase its volumes in the entry-level segment. Launching a sporty model could be an attractive option for the company,” says auto expert Murad Ali Baig.

          

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