Yamaha Motor believes that two-wheeler demand in emerging markets such as India and Indonesia have not returned to 2019 levels and “we expect the recoveries there to be slow”. However, other markets have “mostly recovered”, the company has noted in its business results for the calendar year ended December 31, 2022.
The observations are part of the analyst briefing held in Japan recently, where the Yamaha management has indicated that it expects the market for premium segment models to “grow in step” with the growth of upper-middle class populations worldwide.
India’s two-wheeler sales have been languishing for a while now even before the pandemic thanks to high price tags following safety and emission regulations. The voluminous entry-level segment has been the worst hit since even a marginal price increase here can cause tremendous resistance to buying because of the realities of lower disposable incomes in smaller towns and villages.
Yamaha has, of course, been focusing on the premium-end of the market, which has not been as badly hit but would clearly welcome demand getting back to pre-COVID levels. During the Q&A session, the company has also stated that the semiconductor shortage continues to be the biggest obstacle in supplying “enough product”, which perhaps holds true for its premium range in India too.
Chip Crisis Easing Out
The good news, from Yamaha’s point of view, is that the chip crisis has “slowly improved” and production will be higher than in 2022, “but still insufficient to meet market needs”. For premium segment models, it is formulating a production plan based on the volume of semiconductors “we have secured commitments for from our suppliers”. If everything goes according to plan, the company expects to have “recovered enough over the latter half of 2023” to be able to meet market demand.
Getting back on track quickly is top priority since both India and Indonesia are Yamaha’s biggest markets even though its market standing in each country is hugely different. Yet, even while it has a marginal presence in India, the fact remains that this is the world’s largest two-wheeler market, which means the opportunities are immense, especially at a time when the transition to electric is happening at a rapid pace.
While emerging markets continue to be a challenge, Yamaha has indicated that demand in developed markets has “begun to calm down after peaking in 2021”. Yet, it remains robust since the value of motorcycles for outdoor recreation “was reaffirmed” during the pandemic. “Furthermore, we are seeing more young purchasers of motorcycles and look to firmly capture this demand,” the management has stated.
Trends In China
The analyst briefing has also dwelt upon the Chinese market, where Yamaha has been selling small-displacement motorcycles for daily mobility. Over the last few years, “more young people” have become interested in motorcycling as a hobby.
Consequently, in addition to the midsize scooters (155-300 cc) that the company has focused on with its premium segment strategy, it will also “aim to capture” the demand for 300 cc sport bikes, which are now very popular. Yamaha is in the midst of building the market by focusing on dealership development and the like, and “we expect growth here in the future”.
As for risks and opportunities in CY23, the company maintains that demand remains the “foremost risk”. For regions and product categories short on inventory, the company will operate at full capacity in the first half of the fiscal year to get them back up to the right levels.
Looking Ahead
“If we are restocked but demand falls in the first half, the second half may end up being difficult for us, but at the moment, sales expectations from our dealerships are positive,” it has elaborated. Additionally, the semiconductor shortage remains ongoing and production plans for the first half of the year clearly are not in sync with the sales volume needs of the market.
However, if the chip procurement situation improves, production can be raised. “We have factored in conservative assumptions for the surging costs for raw materials, energy, and labour, and likely foreign exchange rates,” the management has added.
Beyond this, Yamaha has also pointed out that it is unclear how interest rates will affect or slow down product demand. “We have not seen any indications of this yet, but we will monitor the situation and respond appropriately,” it has stated.
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