Yamaha Joins Japanese Motorcycle Makers to Expand in India

Yamaha to Add Capacity in India
Workers assemble motorcycles on the production line at the Honda Motorcycle & Scooter India Pvt. plant in Manesar, India. The company introduced six new models and a scooter yesterday. Photographer: Prashanth Vishwanathan/Bloomberg

Yamaha Motor Co. is joining other Japanese competitors to add motorcycle capacity in Asia’s second-fastest growing major economy, betting demand from Indians seeking personal transportation will sustain.

Yamaha’s local unit will invest 8 billion rupees ($151 million) to triple capacity by March 2013, it said in a statement yesterday. Suzuki Motor Corp. will spend 1 billion rupees to produce more two-wheelers, Atul Gupta, vice president for sales and marketing at the local unit, said in New Delhi.

Honda Motor Co., which reiterated a plan to almost double two-wheeler capacity in India by 2013, and other Japanese motorcycle makers have unveiled new models at the New Delhi auto show, counting on economic growth to generate demand in the South Asian nation. Prime Minister Manmohan Singh said last month India will return to 8.5 percent to 9 percent trend growth after the global economy stabilizes.

“The last two years were exceptional and we have seen a normalizing in the market,” said Roy Kurian, national business head of India Yamaha Motor Pvt. “We have no reason to believe that our sales will tumble.”

The pace of expansion in Asia’s third-biggest economy may slow to 7.5 percent in the fiscal year ending March 31, Singh said, compared with 8.5 percent in the previous 12-month period.

“Our two-wheeler segment is in sync with the Indian economy,” said Naresh Kumar Rattan, vice president, sales, at Honda’s motorcycle unit. “So long as it continues to expand at its current pace, we don’t foresee any reduction in demand.”

Capacity Additions

Yamaha will raise motorcycle and scooter capacity to 1 million units from 330,000, Kurian said. The Iwata City, Japan-based company introduced its first scooter in India yesterday.

Suzuki Motorcycle India Ltd., the wholly-owned subsidiary of the Hamamatsu, Japan-based company, will increase capacity to 540,000 units by 2013 from 360,000 now, Gupta said.

Honda Motorcycle & Scooter India Pvt., the local unit of the world’s biggest motorcycle maker, introduced six new models and a scooter yesterday, including the 110 cc Dream Yuga. The company is targeting 30 percent market share by 2020 from 14 percent now, Rattan said.

The Japanese motorcycle makers will compete with Hero MotoCorp Ltd., India’s biggest, and Bajaj Auto Ltd., the second-largest. Hero, based in New Delhi, will boost capacity at its existing factories to 7 million units by March from 5.4 million in the last fiscal year, and build a fourth factory by 2013, Ravi Sud, chief financial officer, said in November.

Hero Shares Drop

Hero MotoCorp fell 5.1 percent to 1,735 rupees, the lowest level since June 17, at the close in Mumbai trading. The stock was the biggest loser on the 30-member benchmark Sensitive Index, which advanced 0.1 percent.

Hero unveiled a concept hybrid scooter at the show today as it competes with its former partner Honda. The Japanese company exited the joint venture to expand its own unit after Hero Group, the New Delhi-based founders of Hero, acquired Honda’s 26 percent stake in March.

Piaggio & C. SpA, based in Pontedera, Italy, will start selling its Vespa scooter in India from April, Ravi Chopra, managing director of the local unit, said today. The company, which has a capacity to make 150,000 units annually in the country, also plans to introduce four motorcycles in India this year, he said.

Slower Growth

Sales of motorcycles and scooters in India rose at a slower 16 percent pace in the eight months ended November, compared with 28 percent growth in the year-earlier period, according to the Society of Indian Automobile Manufacturers.

The group may cut its annual domestic passenger-car sales target as higher borrowing costs and fuel prices sap demand, Sugato Sen, a senior director for the group, said on Dec. 8. It had earlier forecast sales growth of 2 percent to 4 percent, compared with 30 percent expansion in the year ended March 31.

The motorcycle makers don’t expect an increase in the price of fuel to slow sales. Prices of gasoline in New Delhi are 17 percent higher than a year ago, after being cut twice in the past two months, according to figures from Indian Oil Corp.’s website.

“Rising fuel prices will take their toll on four-wheelers, which are luxury items,” said Yamaha’s Kurian. “Not two-wheelers, which are necessities.”

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