Ruling out production cuts, Yamaha Motor India sees the current slowdown as temporary and expects it to revive shortly with recent government measures. Yamaha Motor India Group of Companies chairman Motofumi Shitara, in an interview with FE’s R Ravichandran, said the transition from BS IV to BS VI would end up in cost escalation of around 15% on its products. Had the GST Council gone ahead with 10% rate cut, the on-road prices of vehicles would have come down by 8%, he adds. Edited excerpts:
The two-wheeler industry is under pressure as far as sales are concerned. Your views.
Liquidity issues, weak consumer sentiments, increased rates of insurance premium and financing schemes, as well as the overall slowdown in economy, are some of the reasons for the decline in sales over the past few months. In addition, the transition from BS IV to BS VI, the government’s recent announcement on the ban of internal combustion engine (ICE)-driven two-wheelers under 150cc by 2025 as well as government’s push for electric vehicles (EVs) have led to the delay in customers’ buying decision. However, with the slew of government measures and the festive season around along with good rainfall, we are hopeful that the market would revive soon. We expect the two-wheeler market to grow 6-8% in the current fiscal.
With the government (GST panel) ruling out any further cut on rates, how do you see growth as far as this fiscal is concerned?
This has been one of the major concerns for the industry since the good and services tax (GST) was implemented in 2017. The 10% GST cut would have reduced the on-road prices of vehicles by 7-8%. The reduction would have definitely helped in improving the market. With no relief now, it will surely impact the buying decision of customers to some extent.
With firm’s sales for April-August having fallen sharply, how is Yamaha Motor India going to mitigate the fall and what do you anticipate for the fiscal?
This is a critical situation for the entire industry. As I told you, the current slump in the auto sector is due to various reasons and corrections are to be made in all those areas to improve the situation. As a brand, our continuous efforts have been to reach out to potential customers through both online and offline platforms and create awareness about the existing Yamaha’s line-up and our attractive offers. In the calendar year 2019, we are targeting to sell about 7 lakh units in the domestic market.
The company had to face labour unrest some time at the end of 2018 for a few days. Your comments.
It was an unfortunate incident but since then, we have taken several steps to establish a better communication with our employees and ensured regular communication put in place to understand their concerns. The employees also came forward and utilised this opportunity to put forth their demands and participated in the discussions in a planned way without affecting the company’s production targets. The entire efforts were made with an objective to provide a peaceful, positive and conducive environment for everyone at Yamaha. It was due to this collaborative approach that we were able to sign a three-year wage settlement with our workers at Chennai factory recently and at Surajpur factory earlier this year.
Given the volatile market conditions and poor customers’ sentiment, is the firm looking at any production holidays or lay-off?
No, we are not looking at any production holidays as of now. We are running both the shifts in our plants and are continuing with the operations. In the current situation, our employees need us and we are trying our best to support them.
Challenges before BS VI and the cost escalation for consumers?
Moving from BS IV to BS VI is a big leap and then completing this journey within three years made this task even more challenging. Had it been the jump from BS V to BS VI, the entire process would have been smoother. However, with our expertise and support from global team, we were able to overcome the challenges and develop products with the required specifications in a short duration. The real challenge is not engines or engine technology as that’s already available, but system integration and optimising them as per Indian Driving Cycle and the time required for calibration and validation. As of now, we are confident to introduce stream of India Yamaha Motor (IYM)’s BS VI models well in advance to date of implementation i.e. April 2020. To be precise, the company will rejig its line-up with BS VI-compatible motorcycles and scooters in several phases starting as early as November 2019 for motorcycles and January 2020 for scooters. The hike in the production cost for launching BS VI variants may impact the pricing of two-wheelers varying between 10%-15% on average depending upon the product features.
Yamaha India’s strategy, perspective on EVs?
Yamaha’s strategy would be to strengthen its portfolio in the tier I & II cities and at the same time, develop a strategy to expand its base in the untouched markets. We will continue to focus on overall target audience for premium and deluxe segments along with further consolidating scooters. In the next five years, we plan to sell 2.5 million units by introducing models for both motorcycles and scooters. On the EV side, the development of an all-new EV platform is underway. We always want to start a new product based on a global platform and this won't be only for the Indian market. It will be for the other global markets, too. We are setting up alliances with some key suppliers (for EVs). We might introduce EVs in India in 2-3 years. We already have a tie-up with Taiwanese manufacturer Gogoro to develop EVs in Taiwan. This year in June, we have launched the EC-05 electric scooter for riders in Taiwan.
Investments in new products, if any?
We have invested more than Rs 1,500 crore in the past four years in India and in the next three years, we plan to invest another Rs 100 crore to be utilised in product development and upgrading our facilities and testing labs in R&D centres based in Surajpur and Chennai factories.