Yoshihiro Hidaka believes that he and his teams at Yamaha Motor in Japan and across the world learnt some key lessons during COVID where, in hindsight, some issues could perhaps have been better handled.
In the Integrated Report 2023, which was recently uploaded on the company’s website, the President, Chief Executive Officer and Representative Director says, “there are points we must reflect on” while tackling the myriad challenges arising from the pandemic.
“When the COVID-19 pandemic began, we were quick to put the brakes on production,” he recalls. This decision was made assuming that economic activity would slow down and that demand would decrease, but contrary to expectations, the company saw an increase in demand for outdoor recreation along with revenge spending.
As Hidaka adds, the company responded by immediately stepping up production but faced disruptions in the supply chain caused by the semiconductor shortage and other factors. This led to insufficient inventory and caused delays for customers, the impacts of which “we are still feeling today”.
Now looking back, he is of the view that perhaps with “better judgment on the slowing down and speeding up of production, we may have more accurately met customer expectations”. This experience was “a painful reminder for me” of the importance of building resilience in order for Yamaha to grow further, even amid an unpredictable business environment.
“I believe we need to keep a close eye on the world and on the company as a whole, and to build the corporate structures enabling all relevant departments to come together quickly when events occur, make decisions, and then immediately put them into action,” concedes Hidaka.
Rev Up, Slow Down
Mastering the art of “when to hit the brakes and when to step on the accelerator” for operations is difficult with a business model like Yamaha’s, where the supply chain is long and the base of business partners expansive. “That said, we want to hone this ability so that when we next face another major development, even if we have to slam on the brakes first, we want our engine to smoothly build revs as soon as our foot is back on the gas,” says the Yamaha Motor President.
There is yet another significant observation he makes on the COVID experience. This pertains to the area of creating and expanding new businesses, where Hidaka says it is important for all involved to come up with and share ideas, and “to then breathe life into and grow new businesses” from these ideas.
“This has been our approach until now when proposing new mobility options and other products to the world, but I sense that the quality and quantity of the communication necessary for that declined with the COVID-19 pandemic, since opportunities for face-to-face discussions became scarce,” he continues.
To generate innovation, people’s minds “need to be open” to the outside world. Hidaka makes no bones about the fact that Yamaha cannot achieve innovations unique to its brand by looking inward. From that sense of crisis, the company has made ‘transformation’ and ‘speed’ the key words for 2023.
It has also laid out high-priority themes and launched key projects relating to motorcycle electrification and new mobility. “Through these projects, we will bring various divisions together—from production and sales to procurement and technology—to form unified entities working to resolve issues under shared objectives, turning the inward gaze of the pandemic back outward to foster an environment that encourages innovation,” says Hidaka.
Targeting India, ASEAN
The current medium-term management plan aims to accelerate the premium segment strategy in motorcycles and improve profitability by targeting the upper middle class in ASEAN markets and India, which is expected to expand rapidly over the next decade.
In Indonesia and the Philippines, premium models are low on supply due to a shortage of semiconductor components, while in India, premium sports bikes are seeing steady growth. In light of the demand situation in ASEAN markets, the report states that “we believe we will be able to catch up well if the supply of semiconductor components stabilises'.
According to Yamaha, marketing that integrates the digital and real worlds is the key to getting customers to purchase premium offerings. Through digital technology, the idea is to work on one-to-one marketing by tailoring communication to each customer according to their values and purchasing trends, expanding touch points and strengthening relationships with buyers.
With this new marketing tool, sales of connected vehicles are targeted to grow to 2.5 million units by fiscal 2024. “In addition, while we initially planned to double the number of premium brand stores in India, which act as our actual points of contact with customers, we were able to triple the number of stores (compared to 2023), exceeding our plans,” states the company.
For the remainder of this calendar year, Yamaha expects demand for motorcycles in developed markets to remain firm, especially in Europe, and for motorcycles in emerging markets such as Indonesia and India to gradually recover. Although plans are on to increase production and sales, the company expects the risks and impacts of rising raw material prices and shortages of semiconductors and other components to continue in 2023.
Electrification Plans
Yamaha is also implementing motorcycle technology strategies which will focus on improving the fuel efficiency of its internal combustion engines, expansion of its electric model lineup and developing renewable energy-compatible powertrains.
“In examining the potential effects on lowering CO2 emissions, major factors in introducing products as part of our electrification strategy will be the trends seen in electricity use via renewable energy sources and monitoring the maintenance status of the charging infrastructure in place in different countries and regions,” the company has stated in the Integrated Report.
Yamaha will begin by launching products in Europe, followed by the ASEAN region — where the majority of its CO2 emissions originate — between 2030 and ’35. With 80% of Yamaha Motor’s motorcycle sales happening in Asia, the goal is to supply this market with compact, convenient, and affordable mobility options.
“Moreover, we look to develop and popularise more fuel-efficient products to help combat climate change. In addition, from 2023, we will launch a companywide motorcycle electrification project to promote and accelerate electrification in the motorcycle domain,” Yamaha has indicated..
According to the Integrated Report, Yamaha expects demand for motorcycles to remain particularly high in emerging markets and will “look to make progress” with parts procurement, production, and shipments as it strives to optimise market inventory levels for products in short supply.
Potential Risks
The risks anticipated include price hikes for materials like aluminum, precious metals, and steel, as well as further rises in labour and energy costs. Additionally, global economic trends, exchange rate fluctuations, and other factors make the situation quite uncertain. To address these risks, Yamaha will “move forward with core structural reforms” such as lowering costs and raising productivity.
At the same time, the marketing and technology departments will come together to work on upping the pace of such reforms, create new value for adapting to changes in the business environment and “make headway with initiatives for sustainable growth”.
The Integrated Report also dwells on safety, where Yamaha reiterates that it is essential not only to have technology aid riders but also to improve user skills and connect people to their machines. To that end, it aims to create a world free of accidents based on “our Jin-Ki Kanno × Jin-Ki Anzen safety vision” centered on technology, skills and connectivity.
“Specifically, we will work on helping customers identify potential dangers, make sound judgments, skillfully operate the motorcycle to avoid said dangers, and mitigate damage if sustained; assist in improving riding skills; and collect data on vehicle use and operating conditions to help prevent human error and environment-related accidents,” states Yamaha.
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