TOKYO -- Honda Motor's investment in Southeast Asian ride-hailing app Grab under a partnership announced Monday is part of an effort to develop a new business model as the sharing economy threatens the Japanese company's dominance in the region's motorcycle market.
The Singapore-based service has spread to 34 cities across six countries since its 2012 launch.
Honda, the world's largest motorcycle manufacturer, dominates in many Southeast Asian countries. It boasted a 79% share of Thai sales, a 70% share in Vietnam and a 69% share in Indonesia last year. This success raises the question of why the undisputed leader has its eye on new services.
Ride-hailing services have taken off in recent years in countries where motorcycles are popular. Motorcycle taxis have become a key means of transportation in a region where progress on public transit is often slow. This has fueled the rise of smartphone apps as a tool to help motorcycle operators make money more easily.
Honda partner Grab is not the only company to tap this growing market. Uber Technologies launched motorbike taxi services in Indonesia and Thailand this year. Indonesia also has homegrown player Go-Jek.
Slumping motorcycle sales in emerging markets are another concern for Honda. Demand has flagged in Indonesia, while local upstarts are making for tough competition in India, the largest market. Honda's global motorcycle sales dipped 3% to 17.1 million units in fiscal 2015.
The company faces the question of how to build a new market. Honda will consider using such information as Grab customer data to develop new products and services. It will also put information technology to work to ease urban gridlock. Honda plans to offer environmentally friendly motorbikes to Grab operators as well.
The rise of ride-hailing could eat into major automakers' car sales as consumers shift from buying to sharing. Honda is trying to get out in front of this structural change and diversify profit sources.
In the U.S. and elsewhere, Honda has started out with motorcycles to build brand awareness and then drawn customers to cars later. But whether this blueprint will continue to work remains to be seen. Thinking outside the box to develop a new business model will be crucial to ensuring continued growth.