#Husqvarnamotorcycles

The changing face of the global motorbike market

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Earlier in the week we touched on the 1,800,000 fall in the number of Japanese who possess a large capacity motorcycle license. The status of the Japanese motorcycle companies makes for some interesting comparisons. Honda remains the largest global manufacturer with over 17.7 million units produced annually. Yamaha has seen a c.1mn unit decline over the last 5 years but a jump in the average profitability of its bikes. Suzuki has cut production by almost 50% as it continues to rack up losses and Kawasaki has stuck to a large bike bias which has stabilised profitability. Here is a look at the state of revenue growth over the last 5 years among major listed motorcycle manufacturers.

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Profitability is a different picture among the global makers. Suzuki has been struggling to make a profit, Kawasaki has drifted down but remained in the black. Honda has been outpaced by Yamaha and among the foreign makers BMW Motorrad and KTM have beaten Harley-Davidson’s performance.

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The foreign makers are all much smaller scale than the Japanese and tend to focus in the larger engine size segments. Harley-Davidson has suffered the most among the 5 big players in terms of unit growth. KTM, followed by BMW Motorrad have made the biggest relative gains.

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Looking at average EBIT/unit produced yields starkly different results. Harley nets around $3,000 per motorcycle in EBIT with BMW around half of that amount at €1,285 ($1,430) with KTM half of that. Kawasaki makes the most per motorcycle among the Japanese on a unit basis. Honda has remained relatively stable at $103 (although we should note that this is closer to $170 as the consolidated production number is about 10m units and the global number including equity method companies is the 17.7m) and Yamaha at $64.  These are ridiculously low numbers and of course identifying mix within that would yield far more healthy results for certain models and losses on others.

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One thing it points out is that focused strategies appear to be paying off for the Europeans and to some extent Kawasaki which has moved away from a me too approach. Efficiency and brand seems to be paying off for BMW’s continued rise and a broad range of product unlike Harley which seems to be stuck in a divine franchise scenario. Profitable but struggling to break out of cruisers. It has had a stab at sports bikes through Buell (business was spun off and EBR has since closed) and the Porsche designed V-Rod (now out of production). Now that Ducati is potentially being sold by Audi, does Harley look to use a proper sports brand with no clash in its line up to fuel (no pun intended) its growth?

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Is the motorcycle market bust in Japan for real?

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Japan may sell around 1/7th the number of bikes at the peak in the 1980s but the latest stats from the 44th Tokyo Motorcycle Show in late March 2017 revealed a record number of crowds – some 146,495, up 10,000 on last year. 155 exhibitors showed up. In fact it was even larger than last year with 2 floors being utilized vs last year’s show. Clearly the motorcycle product market is expanding – from scooters, enduros, adventure, super sports, naked, e-bikes to trikes. Interestingly Japanese brand Yamaha has turned its success on the track to pricing some of its products (e.g. R1M) at premium European levels, something unheard of 5 years ago. In the reverse Harley-Davidson has had to introduce a 750cc bike made in India to compete with Yamaha’s budget entry cruiser, the Bolt.

The average age of riders in Japan is now 53 and rising. Getting a license is an expensive ($3,000) nightmare and finding a parking space can be an even bigger horror. So there are plenty of ways to turn this sinking ship around. Product has evolved along with huge leaps in technology. Cornering ABS and cornering sensitive traction control to begin with. Even Harley-Davidson has realized it can’t survive on just its legacy. It has introduced the Milwaukee-8 engine which looks to modernize its line-up. Europe’s largest motorcycle maker KTM is bringing out incredible range of products in both its KTM & Husqvarna brands while BMW is entering the sub 400 category to attract younger riders. Yamaha is dominating the Japanese makers for product offering. Honda amazes in its ability to bore with totally uninspiring product. The only things that raise a pulse are concepts which the engineers say won’t see production. Suzuki and Kawasaki remain fringe players with a dash of lunacy amongst a pretty ordinary offering.