Yamaha Motor Co. will invest Rs1,575 crore in a bid to turn around the Indian operations of the world’s second largest two-wheeler maker.
The infusion, to be spread over five years, is an attempt to regain lost marketshare, says Tomotaka Ishikawa, the managing director in charge of Yamaha’s operations in India.
The investments come as Yamaha India has accumulated losses of Rs1,000 crore since 2001, following their split with local partner Escorts Ltd.
Yamaha has seen its market share fall to 3.6% from 8.4% five years ago as rivals such asHero Honda Motors Ltd and Bajaj Auto Ltd gained significant ground on the basis of more fuel-efficient motorcycles.
“The headquarters believes there is potential in the market,” says Ishikawa, who was brought in as a turnaround specialist and appears to be having an early impact.
Under him, Yamaha has sold more of its Gladiator brand motorcycles this financial year, targeting India’s youth segment to improve sales.
The company’s sales volumes for April-December 2006 rose 17.32% to 179,932 units, after three years of continuous declines. Ishikawa is sponsoring rock concerts and giving away bikes as prizes in college festivals to promote the Gladiator brand.
Yamaha has also hired model-turned-actor John Abraham as its brand ambassador to help push its youthful image.
Gladiator’s results illustrate why Yamaha is continuing to pour money into its operations here, say analysts.
“India has too much growth potential for Yamaha to write off,” said Christopher Richter, an analyst with CLSA Asia-Pacific, who tracks the parent company from Tokyo.
India’s robust economic growth is stoking an annua l double-digit growth in demand for two-wheelers in what is now the world’s second largest two-wheeler market by number of units sold.
Domestic sales of two-wheelers are likely to rise to 10.2 million by 2012 from seven million in 2006, according to the National Council for Applied Economic Research.
But this same growth potential has also prompted industry leaders Hero Honda and Bajaj Auto, who together sell eight out of every 10 motorcycles made in the country, to invest Rs4,500 crore in building factories to try and consolidate their lead.
Hero Honda, India’s largest two-wheeler maker, is launching as many as eight new models and variants every year to defend its 47% share in the motorcycle market. The company is building a factory in Haridwar, Uttarakhand, which will add 5,00,000 units or 13% to the existing 3.9 million units capacity.
Bajaj is also building a new factory in Pantnagar, Uttarakhand, to ramp up its bike-making capacity by a third to 3.6 million units by April 2007.