2009 was a tough year for motorcycle manufacturers, with a 20% drop in the UK new bike market. Worldwide, the picture is more mixed, but the latest financial results from leading brands suggest that 2010 is also going to be challenging. Alastair Walker looks at the changing balance of power in the bike industry.
For the last four decades the Japanese motorcycle manufacturers have been the dominant force in the two-wheeled world, although brands like Harley-Davidson, Ducati, BMW and Triumph have all carved out their own niche within the big bike sector. Globally, most motorcycles sold are sub 150cc commuter machines and here, Honda, Yamaha, Suzuki and to a lesser extent Kawasaki, still sell in serious volumes, although their market share has been drastically reduced by the Chinese in the last ten years.
That process seems unstoppable, as rising pay and pension costs, plus a strong yen, make it increasingly difficult for the Japanese companies to physically make their bikes in Japan. It also seems unlikely that the Chinese will welcome more `partnership’ deals in the future from outsider companies, as they’ve now acquired all the technical knowledge they need to make basic motorcycles and scooters – so why share the profits?
Honda posted financial results for the last quarter of 2009 recently and stated that motorcycle sales had dropped 5% last year, with another 5% fall predicted for 2010. But Honda’s car division may profit more than any other car maker from Toyota’s recent misfortune, so a modest drop in motorcycle sales this year won’t affect Honda too much if their small car sales rise.
Meanwhile Suzuki are busy tying up their Volkswagen deal and selling a great deal of light trucks, small cars and bikes in India – the fatest growing two-wheeler market on the planet. Suzuki bike sales in India rose 60% in December 2009, and 93% in January – yes, that’s 93 per cent up! Unsurprisingly, Kawasaki want a slice of this action too, and they agreed a deal with Bajaj India to supply 250cc Ninja bikes as CKD ( complete knock-down ) kits last year, with modest sales of around 130 units per month starting things off for the big K in India. Ducati, Harley and Triumph have all set up importer operations in India in 2009 – 2010 will be an interesting year there for them, with huge potential profits to play for.
Kawasaki have most to gain in developing economies, and not just on motorcycle sales. In fact, Kawasaki have an unrivalled reputation in working with governments worldwide on flagship construction projects. Tunnels, bridges, space shuttles, cement factories, ships, steel – you name it and Kawasaki can make it happen. Motorcycles are a sideline for them and their Japanese production fell by 35% in 2009, but Kawasaki have factories in Thailand, Brazil and the Philippines. These plants will almost certainly be the main centres of their bike production within the next five years.
Yamaha might be market leader in the UK, but they have some problems. Like a £1.5 billion loss in 2009, plus asking for 800 voluntary redundancies across their motorcycle division. Yamaha motorcycle sales dropped by 28% in 2009, a much steeper fall than Honda or BMW suffered in a generally declining market. On the upside, Yamaha make plenty of low cost, sub 150cc commuter machines – that gives them a diverse, and global, customer base in terms of age, demographics, spending power etc.
Harley-Davidson is arguably in worse trouble, as they mainly sell in a narrow niche market – custom bikes. The company made its first reported loss since 1993 last year, laying off workers and closing the Buell division. It now has to sell MV Agusta and rebuild its battered brand reputation in the US and Europe. It will be a long road back for Harley and their biggest challenge is making the marque appeal to the under 50s, you cannot keep selling bikes to old men – they die eventually.
This is the root cause of the problems for half the motorcycle industry at present. Younger customers are declining in numbers across Europe and North America. The harsh truth is that a diminishing number of middle-aged and older riders are keeping BMW, Triumph, Ducati, Aprilia, Guzzi, KTM and others afloat, but how long can that last?
For example, last year BMW sold 15,800 R1200 GS models, and another 8800 R1200 GS Adventure variants, plus 10,900 F800GS bikes. No company can rely so much on just one type of bike, bought by the same 45-65 year old customer base, in the long term. On the upside, the new S1000RR sportbike looks set to demolish the Japanese in the sportbike class in 2010, purely on price alone, if not real ability on the road.
The central problem for non-Japanese brands, who have missed the boat as regards partner deals in small capacity, high volume production in the Far East, is this; who can find the most 25-35 year old customers, in the rapidly developing economies of South America and Asia, or cut their European/USA manufacturing costs to profitable levels, without making unreliable products? Toyota is a lesson in how things can go expensively wrong when every penny is chopped from every component part price. Quality suffers.
The motorcycle brands that adapt rapidly, and find new markets, will survive. The losers will join Buell in the history books.