Yamaha Motor has indicated that India is “gradually transitioning to a profitable structure second only to Indonesia”.
This observation was made by the management during an analyst briefing in Japan on Friday to discuss the financial results for the April-September period of this calendar.
“In Indonesia, Thailand, India, and other markets, if we can stabilise the supply of premium segment models, we are sure to reap solid profits,” said the company. Yamaha has moved to adopting a premium focus in its two-wheeler business across emerging markets and this is paying off in India where it still has a lot of catching up to do with rival two-wheeler makers.
While dwelling upon the premium strategy, the Q&A session in Japan has cited India as an example to drive home the point of the number of motorcycles sold and the proportion of their value. “Taking India as an example, premium-priced motorcycles account for about 20% of unit sales, and the price per unit changes between 20,000 to 30,000 rupees,” Yamaha has said.
Entry-level sport models are the mainstay and the market makeup is different from other Asian markets. Market demand for these is around 2-3 million units, and while “this is small compared to the low-priced segments, it is extremely large compared to the numbers seen in developed markets” as a whole. Hence, this (focus) will be effective in terms of profits.
Higher Margins From Premium
The good news for Yamaha in India is that despite market share being in single digit figures, it is clear that it is only premium models that will generate higher margins and, consequently, a stronger balance sheet. Yamaha has honed its India strategy over the last few years to steer clear of commuter models and choosing to look only at premium motorcycles and scooters.
This is true for other emerging markets as well and the company has reiterated that if “we can amplify sales of premium models, we can also aim for high profit margins”. The key, therefore, is to “pursue our premium segment strategy in order to increase our profitability”.
In its Integrated Report 2022, Yamaha has clearly stated: “One of the themes in our new medium-term management plan is to leverage the recovery in demand and our premium segment strategy to improve profitability,” it has stated.
According to this report, overall two-wheeler demand in Asia has yet to recover to pre-pandemic 2019 levels. “Our first step over the next three years will be to accelerate initiatives in anticipation of a recovery in demand. In ASEAN markets and in India, we will target the upper-middle class, which is expected to grow rapidly over the next 10 years, and ramp up our premium segment strategy even more than before to solidify our advantages,” states Yamaha in its Integrated Report 2022.
Brand Marketing Efforts
As it continues to aim for higher unit sales growth, Yamaha will carefully map out strategic segments in each country and not only offer attractive products but also launch “stronger brand marketing initiatives” to create firm ties with customers.
“For customers in this segment who, through digital media, value individuality and self-actualisation, we will combine the digital and real worlds to implement our one-to-one marketing approach,” the Integrated Report says. The idea is to target each individual customer in order to expand “our range of touch-points and to strengthen the relationship with our customers”.
To be able to achieve this, Yamaha wants to expand sales of connected motorcycles to 2.5 million units by 2024. It also plans to “roughly double” the number of premium dealerships in India, which serve as “real points of contact” with customers.
“As we aim to improve profitability by forging ties between customers and the Yamaha brand by using digital technologies, we will accelerate the implementation of our premium segment strategy targeting the upper-middle class in India and ASEAN markets,” states the company.
Chip Supply Constraints
During the Q&A session in Japan on Friday, Yamaha has pointed out that demand from consumers switching from public transport to personal mobility in emerging economies continues. Yet, there are issues in the supply chain, particularly availability of semiconductors, which has hit the premium segment.
“We still have back orders for premium models and expect stable demand in fiscal 2023 as well. Production of low-priced models is growing amidst semiconductor supply constraints, but supply has not kept pace with demand in the premium model segment,” the management has stated.
Beyond India, the company has pointed out that the effects of passing on cost increases have become pronounced due to the switching of the model year and the timing of model updates. In addition, the sharp rise in raw material costs “seems to have come to a pause” and the yen continues to weaken against the US dollar, “something we had not anticipated”.
In light of this situation, the third quarter performance was significantly above projected targets. Yamaha expects the effects of passing on higher prices and the lull in raw material price hikes to continue and has made upward revisions to its forecast to reflect foreign exchange gains.
On the issue of inventory, the company has made known that it has not been able to build up a sufficient stock of premium segment motorcycle models in emerging markets and this is likely to continue into 2023.
Also Read:
Yamaha India Introduces 2022 Monster Energy MotoGP Edition Bikes
Yamaha Adds Silver Color Variant To Fascino 125 Fi Hybrid Lineup