Yamaha joins domestic motorcycle rivals in rush to up capacity in India

Bloomberg

Yamaha Motor Co. is joining its Japanese rivals in boosting its motorcycle capacity in India, betting demand from Indians seeking personal transportation will continue.

Yamaha’s local unit will invest 8 billion rupees (¥11.7 billion) to triple its capacity by March 2013, the company said in a statement Thursday. Suzuki Motor Corp. will spend 1 billion rupees (¥1.5 billion) to produce more motorcyles, 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 its 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 country. Prime Minister Manmohan Singh said last month India will return to 8.5 to 9 percent 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.

“So long as the economy continues to expand at its current pace, we don’t foresee any reduction in demand,” said Naresh Kumar Rattan, sales vice president at Honda’s motorcycle unit.

Yamaha will raise motorcycle and scooter capacity to 1 million units from 330,000, Kurian said. The company introduced its first scooter in India on Thursday.

Suzuki Motorcycle India Ltd. will increase capacity to 540,000 units by 2013 from 360,000 now, Gupta said.

Honda Motorcycle & Scooter India Pvt., Honda’s local unit, introduced six new models and a scooter Thursday. The unit of the Tokyo-based automaker is targeting 30 percent market share by 2020, up from 14 percent now, Rattan said.

Japanese motorcycle makers will compete with Hero MotoCorp Ltd., India’s biggest firm in the sector, and Bajaj Auto Ltd., the second-largest.

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

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