Yamaha likely to join hands with Bajaj

Post recast, contract manufacturing may be the best way forward

MUMBAI: Yamaha could team up with Bajaj Auto as part of its restructuring plan for India.

This may then take the form of a new joint venture company where Bajaj will use one of its plants to create a common engine platform for high-end bikes.

Yamaha will then make the most of a cost-efficient vendor base and retail its motorcycles here.

It remains to be seen though how the joint venture will be structured in terms of the equity structure.

Alternatively, the partners may confine this to a contract manufacturing arrangement for Yamaha in India where Bajaj, in turn, will get access to new technology.

The bigger question, though, is the retailing model of the Japanese company’s bikes.

Will Bajaj help out in terms of lending after-sales support and even displaying Yamaha products in its Probiking outlets?

Or will Yamaha set up its own showrooms across the country?

The answers will be known next month. On Thursday, CNBC TV-18 reported that the Japanese bike maker was planning to write off its losses in India and announce a recast plan on January 10, when the Delhi Auto Expo begins.

There was also a reference in the report to the chief executive officer, Tomotaka Ishikawa being posted overseas.

Neither company was available for comment on the issue but reports have been doing the rounds for many months now that they have been in talks for a strategic alliance.

Nothing has gone right for Yamaha in India since the time it bought out former partner, Escorts’ stake in the joint venture over a decade ago.

Its dealers were a disillusioned lot who just could not cope with the Hero Honda onslaught followed by Bajaj and TVS subsequently.

Further, Yamaha just could not get its cost structure right and also erred in joining the executive segment bandwagon by launching sub 125cc products such as the Crux and Enticer which hardly reflected its core competence in powerful bikes. Ironically, at the time of its entry into the Indian market in the 1980s, Yamaha was literally the hottest brand for motorcycles, thanks to the RDX, but frittered away this advantage with myopic product planning.

The company has since sunk deeper into the abyss with its market share at embarrassing levels of less than 5%.

Equally, it acknowledges the fact that India is too important a market to ignore for two-wheelers, especially when it is the second largest in the world after China.

The only way to begin a second innings on a clean slate is to first ensure that costs do not go out of control.
Bajaj Auto has a vendor base that has mastered this effectively as evident in the case of the recently launched XCD 125. Yamaha needs something like this to stay afloat and a partnership, therefore, only seems logical.

Equally, this time around, the company will not repeat past mistakes in terms of product development but will make powerful motorcycles in the range of over 250cc and reach out to the discerning buyer.

This is what Bajaj would also ideally like to have as part of its endeavour to go up the value chain in bikes and, hence, the idea of a common engine platform makes sense. Yamaha may also avail of this opportunity to outsource critical components from India for its operations across the world. It will be interesting to see if it also helps Bajaj Auto out in its quest for new markets through a retail arrangement.