Yamaha gears up to take on challenges in a volatile world

At one level, the presentation of Yamaha Motor Co’s annual result in Japan on Wednesday could be seen as being quite grim.

In one of the slides, the global market situation is a terse three-word description: ‘Overall not optimistic’. The details that follow are as matter-of-fact, with the developed markets motorcycle business expected to be equivalent to the previous fiscal.

As for emerging markets, the observation in the slide is that, overall, growth cannot be expected. ‘India is still unclear. The Philippines watches volcanic risk.’

Likewise, for the marine products business, large outboard motors are performing well, but medium and small size models are expected to continue decreasing. And then comes the reality of the robotics business where, even though the market is recovering, ‘there may be some risk of coronavirus’.

Everything is not so bad, going by Yamaha’s intended response to these tough market realities. It aims to increase sales and income by ensuring cost controls in its motorcycle and robotics business. The developed markets motorcycle business will see ‘sequential launches’ of EU5 models while in emerging markets, Vietnam sales ‘are in recovery’ while ‘BS6 compatible models are being introduced into India’.

Likewise, increased sales of large outboard motors are planned in the marine products business while the robotics components will aim to secure orders by launching new products.

It is well known by now that in India, Yamaha has changed its strategy to focus on the premium space, both in scooters and motorcycles. The Japanese automaker has been around in the country for decades but just has not been able to emerge as a formidable participant.

Product, retail initiatives

It is now attempting to get things back in shape with a host of initiatives on the product and retail side. Additionally, Yamaha is quite confident that it will be able to showcase its competencies in the BS-VI era and also electrification in the near future. The company’s more detailed report for calendar 2019 states that motorcycles in developed markets improved their income due to increased sales in Europe and increased marginal income at the headquarters.

Sales and income of motorcycles in emerging markets, on the other hand, declined due to a decrease in sales in Vietnam and Taiwan. According to the report, for the fiscal year ended December 31, 2019, the global economy showed a slowdown in its growth amid the uncertain environment such as investment restraint due to US-China trade friction and Brexit issues.

In developed markets, while the Japanese economy maintained a moderate recovery, in the US and Europe, the economy slowed down. In emerging markets, economic growth expanded in Vietnam and the Philippines, while in Indonesia, Thailand and India the economy slowed down. As for motorcycles in developed markets, unit sales increased mainly in models conforming to new regulations in Europe and structural reforms progressed, which reduced deficits. ‘With regard to motorcycles in emerging markets, although unit sales increased in the Philippines and Brazil, unit sales decreased in Vietnam, India and Taiwan, resulting in decreased sales and profits,’ states the report.

Unit sales of motorcycles totalled 5.06 million units as a whole (a year-on-year decline of 5.9 per cent). In developed markets, models conforming to new regulations will continue to be actively introduced and structural reforms will be promoted. In emerging markets, the company will place sales of high-value added products at the core in order for an increase in unit sales and improvement in profitability in each market. This will be by way of strengthening brand power in Vietnam, introducing models conforming to new regulations in India, and expanding sales of electrically power assisted bicycles in Taiwan. Both sales and profits increased for electrically power assisted bicycles due to an increase in unit sales of E-kit in Europe and in Japan. There is some resonance in India for this business in the context of Yamaha’s teaming up with Hero Cycles in this space.

The financial report states that for this calendar, the company expects the business environment to remain uncertain. This is owing to factors including geopolitical risks in West Asia, the spread of novel coronavirus and natural disasters from climate change while some risks such as US-China trade friction and Brexit issues will be mitigated. ‘Considering market conditions and demand trends, the company plans to maintain growth of existing businesses and stable profit, and proceed with developing new businesses to aim for long-term growth,’ states the report.

The forecast for the fiscal ending December 31, 2020 is based also on Yamaha’s ‘assumptions and beliefs in light of the information currently available’ and may differ significantly from actual financial results. Additionally, there could be other risks and uncertainties arising from changes in general economic conditions in the group’s major markets. These include shifting consumer preferences and market competition; changes in governments’ regulations; currency exchange rate fluctuations; dependence on corporate customers and specific suppliers for procurement of raw materials and parts; changes in environmental and other regulations; and, finally, natural disaster, epidemic, war, terrorism, strikes, demonstrations, etc.