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Honda, Yamaha ride together into sunset of Japan's scooter market

Honda's Shinji Aoyama, left, and Yamaha's Katsuaki Watanabe

TOKYO -- Japan's shrinking motorcycle market has pushed onetime enemies Honda Motor and Yamaha Motor into an alliance aimed at freeing up resources for use in more promising regions.

Honda, the world's leading motorcycle maker, could begin supplying 50cc scooters for sale in Japan to Yamaha, its biggest rival, in 2018, the companies said Wednesday. The market for this uniquely Japanese class of motorbikes is "unforgiving," Shinji Aoyama, Honda's chief operating officer for motorcycle operations, told a news conference.

"It would be difficult to comply with the stricter environmental regulations to come, were we to go it alone," Yamaha Managing Executive Officer Katsuaki Watanabe said.

There are currently more than 11 million motorcycles on the road in Japan -- one for every 10 people. But only about 400,000 two-wheelers were sold in 2015. That is a mere eighth of the 3.26 million peak annual sales seen in the early 1980s.

Scooters have fared particularly poorly amid the rise of minicars and electric bicycles. Tougher parking restrictions have proved damaging as well. With the headwinds growing stronger, Yamaha broached the topic of a tie-up with Honda in February. The two had been negotiating behind the scenes since then.

The plan now under discussion would have Honda build scooters for Yamaha to sell as the Jog and Vino, based on Honda's own Tact and Giorno models. The designs likely will become exclusive to Yamaha. The companies also look to team up on developing their next model of scooters for commercial uses, such as newspaper and package delivery.

Honda and Yamaha will collaborate on electric scooters as well -- a segment the duo expects will take off in the motorcycle market as it has in automobiles. They will form a working group to tackle lingering challenges such as battery life and charge time.

Fences mended

Things have not always been so friendly between the motorcycle makers. They grappled for market dominance in the years around 1980, when motorcycles were experiencing a surge in popularity in Japan. Yamaha began releasing model after model in the late 1970s, pulling nearly even with market leader Honda in shipment volume by 1981. Honda then revved up development as well. When the so-called H-Y War was at its fiercest, the rivals were rolling out dozens of new models a year.

Such competition eventually proved unsustainable for Yamaha as unsold inventory piled up, triggering an earnings crisis. Honda emerged victorious. "I joined the company the year we lost the war, and took a 5% pay cut," Yamaha's Watanabe said. But "there's no resentment or ill-will anymore," he said.

Still, the companies are not merging their motorcycle operations; rather, they are making concessions on what sets them apart in a market whose contraction makes it hard to justify production and development costs. While many engineers look askance at such original equipment manufacturing (OEM) arrangements, Yamaha has determined that letting go of some individuality is essential to remaining in the game.

Build up the base

Honda will make the Yamaha scooters at its lone Japanese motorcycle plant, in Kumamoto Prefecture. The manufacturer brought a good deal of production back to this country from China and Vietnam amid restructuring in autumn 2015. But efforts such as the tie-up with Yamaha are still necessary to keep domestic two-wheeler production viable as the market declines.

Many emerging-nation youth aspire to ownership of more powerful motorbikes. The Indian market for 350cc and 500cc sport bikes has grown to 500,000 units, Honda's Aoyama said. Reassessing production of 50cc models, which do not lend themselves as well to overseas sale, has been a pressing task for the company.

Yamaha plans to put resources freed up by the collaboration into markets outside Japan. The company is already well-established in India, and looks to beef up its presence in regions such as Southeast Asia. Yamaha is also eyeing a full-on push into African markets, where demand is expected to grow in tandem with the economy. Such growth could eventually put 100 million motorbikes on the road worldwide, the company believes.

Yamaha's latest medium-term business plan targets annual motorcycle sales of 1.3 trillion yen ($12.5 billion) in 2018. Around 80% of that is seen coming from emerging markets. But up-and-coming Chinese and Indian manufacturers could get in the way. Though Japanese cycles are regarded as more durable, the differences in basic performance between various brands have all but disappeared. As competition intensifies, teaming up at home has become essential to advancing abroad.


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