Yamaha may take partnership route for mass mobikes

Yamaha is exploring strategic options among domestic two-wheeler companies to offer products in the 100-125-cc engine capacity segment. This category represents over 70 per cent of the bikes sold in the country.

The Japanese bike maker has called a pitch from around five merchant bankers in search of the right model, multiple sources close to the development told Business Line.

OPTIONS

“They are looking for a strategic partnership with a domestic player who can help them with technology and low-cost production in the mass motorbike segment. We have given them 2-3 options and they are expected to take a call in 10-15 days coinciding with their board meeting for annual results,” said a top merchant banker involved in the negotiations, while another banker added that top industry names have been suggested for the deal.

Among the options suggested to the company are a technological or a production tie-up for low cost manufacturing. The third option is a strategic stake sale by Yamaha to the interested partner as part of an agreement on technology and production.

Responding to queries on the development, Mr Hiroyuki Suzuki, CEO and Managing Director, India Yamaha Motor (IYM) said, “We do not comment on any market speculation.”

Yamaha has a portfolio of six models in the 125-250 cc segment. Collectively this segment accounts for just 8 per cent of the market for motorcycles in India (2.10 lakh units sold in 2010-11).

MARKET SHARE

The entry-level segment will be key for IYM which is looking to turn its operations profitable and help it counter growing competition. At present, it has four products in the segment, but only about one per cent market share (sold 67,420 units in 2010-11).

Present in India since 1985, Yamaha operates two plants – Surajpur, Greater Noida (UP) and Faridabad, Haryana. However, only the former manufactures complete motorcycles with a six lakh per annum installed capacity. Both these plants were a part of Yamaha's buyout of its joint venture partner, Escorts' 50 per cent stake, in 2001. At present, Mitsui and Co has a minority stake in IYM. The company has invested around Rs 800 crore over the last three years for new product development, dealer network expansion and capacity expansion.

The company is trying to ramp up its output, which is around 3.5 lakh units annually. With demand exceeding production, average waiting periods on popular models like the R15, FZ & SZ series hover at about four to five weeks.

“Around January, the parent company had invested about Rs 400 crore. A majority of this is expected to go into the plans for a third plant (with an export focus), besides the launch of new products like a scooter range by 2012,” said the industry source.

The appointment of Mr Suzuki as the Managing Director and CEO in November last year is also an indication of Yamaha's plan to step up its game in India. Mr Suzuki, who is also a Director in the parent company, is expected to act as a trouble-shooter for Indian operations, industry sources said.