Part 5 of the BOSS article on Honda's current state is after the jump. The TOV forum thread for this part is at TOV forum Part 5 thread. In this part, the author diverted and took a look at Honda's motorcycle business.
"Honda Abandons” the Domestic Market: Asked to Show Its Responsibility as a Leading Global Company
Global motorcycle sales are said to have exceeded 50 million units and be approaching 60 million units. Of this figure, Honda accounts for 1,873,5000 units (in the fiscal year ending March 2011), translating to a leading share of approx. 30 percent.
Honda began as a motorcycle company when Founder Soichiro Honda began producing an accessory engine for bicycles in 1947. In 1952 shortly after the founding of the company, Honda began exporting its products and in 1958, it released the “Super Cub” that has become an ultra-long-selling product that continues to sell even today.
Furthermore, its motorcycle business is a filial son of Honda. In the fiscal year ending March 2011, motorcycles generated 138.5 billion yen in operating income, brilliantly covering the struggling automobile business that has suffered one crisis after another from the collapse of Lehman Brothers to the Japan earthquake most recently. At the half time in the most recent fiscal year, the motorcycle division is again making significant contributions by generating 83.8 billion yen in income (up 36.8% from the previous year) when the automobile business is 105.3 billion yen in the red.
In this situation, Honda introduced two new engines in September with a view to driving further growth of its motorcycle business. One is a 125-cc small engine for emerging countries, and the other is a 700-cc engine for industrialized nations. Both are mainly targeting overseas markets, clearly reflecting Honda’s focus shift in its motorcycle business.
This is all understandable given the fact that new motorcycle sales in Japan only amount to 380,242 units, less than 1% of Honda’s global share. The number has been declining steadily since the 1982 peak of 3.29 million units, and the current figure stands at only one-ninth of the peak sales. Even motor-assisted bicycles (381,721 units were sold in 2010) are selling more than motorcycles.
Reasons behind the declining sales of motorcycles include the falling birth rates, rising prices, and relative vibrancy of the used motorcycle industry led by “Bike King” whose commercials we frequently see on TV. However, the greatest reason is the “loss of interest in motorcycles” among the Japanese. In a way, motorcycle manufacturers are responsible for this lamentable trend.
In 1982 when the motorcycles sales peaked, the so-called “HY war” (sales war between Honda and Yamaha Motor) was the fiercest. To win the war both Honda and Yamaha introduced new products that would not be normally sold in the market. They set competitive prices by ignoring the profitability and exploited their corporate strength maximally. As a result, both were forced to carry massive excess inventories and make significant production cutbacks. R&D stalled and users lost trust in the brands. Honda and Yamaha could not increase sales even during the bubble economy and the domestic motorcycle market shrank to one-third of its peak size by 1990 or thereabout.
Manufacturers were also behind the tightening regulations on emissions and noise, etc. They reduced the number of models to comply with the regulations and, having lost popular models, raised prices to absorb higher costs. While this was going on in Japan, overseas motorcycle markets continued to grow. In this sense, the weakening of the domestic market was clearly caused by the failure of manufacturers to look at the Japanese market seriously.
Finally the motorcycle industry is beginning to demand the government to relax licensing and other regulations. The majority of motorcycle licenses issued in the world are in the 100 to 125-cc class, and in Italy and Spain a person receiving a car license is automatically given a 125-cc motorcycle license. Accordingly, manufacturers in Japan are asking the government to introduce the same system or shorten the mandatory training hours (currently 12 hours).
Still, it is extremely difficult to lure back the users who have lost interest in motorcycles, and even if the deregulation becomes a reality, it might well be a mere drop in the bucket. Currently there are more used motorcycles than new ones and a sweeping reform, including price restructuring, is needed.
As the industry leader, Honda must make active moves, but the company is less than willing because “The Japanese market accounts for only 230,000 units of global unit sales amounting to 18 million units.” (Source at Honda)
For your information, the manufacturer’s suggested retail price of Honda’s Super Cub 110 is 249,900 yen. Who wants to buy such an expensive bike?
"Honda Abandons” the Domestic Market: Asked to Show Its Responsibility as a Leading Global Company
Global motorcycle sales are said to have exceeded 50 million units and be approaching 60 million units. Of this figure, Honda accounts for 1,873,5000 units (in the fiscal year ending March 2011), translating to a leading share of approx. 30 percent.
Honda began as a motorcycle company when Founder Soichiro Honda began producing an accessory engine for bicycles in 1947. In 1952 shortly after the founding of the company, Honda began exporting its products and in 1958, it released the “Super Cub” that has become an ultra-long-selling product that continues to sell even today.
Furthermore, its motorcycle business is a filial son of Honda. In the fiscal year ending March 2011, motorcycles generated 138.5 billion yen in operating income, brilliantly covering the struggling automobile business that has suffered one crisis after another from the collapse of Lehman Brothers to the Japan earthquake most recently. At the half time in the most recent fiscal year, the motorcycle division is again making significant contributions by generating 83.8 billion yen in income (up 36.8% from the previous year) when the automobile business is 105.3 billion yen in the red.
In this situation, Honda introduced two new engines in September with a view to driving further growth of its motorcycle business. One is a 125-cc small engine for emerging countries, and the other is a 700-cc engine for industrialized nations. Both are mainly targeting overseas markets, clearly reflecting Honda’s focus shift in its motorcycle business.
This is all understandable given the fact that new motorcycle sales in Japan only amount to 380,242 units, less than 1% of Honda’s global share. The number has been declining steadily since the 1982 peak of 3.29 million units, and the current figure stands at only one-ninth of the peak sales. Even motor-assisted bicycles (381,721 units were sold in 2010) are selling more than motorcycles.
Reasons behind the declining sales of motorcycles include the falling birth rates, rising prices, and relative vibrancy of the used motorcycle industry led by “Bike King” whose commercials we frequently see on TV. However, the greatest reason is the “loss of interest in motorcycles” among the Japanese. In a way, motorcycle manufacturers are responsible for this lamentable trend.
In 1982 when the motorcycles sales peaked, the so-called “HY war” (sales war between Honda and Yamaha Motor) was the fiercest. To win the war both Honda and Yamaha introduced new products that would not be normally sold in the market. They set competitive prices by ignoring the profitability and exploited their corporate strength maximally. As a result, both were forced to carry massive excess inventories and make significant production cutbacks. R&D stalled and users lost trust in the brands. Honda and Yamaha could not increase sales even during the bubble economy and the domestic motorcycle market shrank to one-third of its peak size by 1990 or thereabout.
Manufacturers were also behind the tightening regulations on emissions and noise, etc. They reduced the number of models to comply with the regulations and, having lost popular models, raised prices to absorb higher costs. While this was going on in Japan, overseas motorcycle markets continued to grow. In this sense, the weakening of the domestic market was clearly caused by the failure of manufacturers to look at the Japanese market seriously.
Finally the motorcycle industry is beginning to demand the government to relax licensing and other regulations. The majority of motorcycle licenses issued in the world are in the 100 to 125-cc class, and in Italy and Spain a person receiving a car license is automatically given a 125-cc motorcycle license. Accordingly, manufacturers in Japan are asking the government to introduce the same system or shorten the mandatory training hours (currently 12 hours).
Still, it is extremely difficult to lure back the users who have lost interest in motorcycles, and even if the deregulation becomes a reality, it might well be a mere drop in the bucket. Currently there are more used motorcycles than new ones and a sweeping reform, including price restructuring, is needed.
As the industry leader, Honda must make active moves, but the company is less than willing because “The Japanese market accounts for only 230,000 units of global unit sales amounting to 18 million units.” (Source at Honda)
For your information, the manufacturer’s suggested retail price of Honda’s Super Cub 110 is 249,900 yen. Who wants to buy such an expensive bike?
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