October 20 2008.

Japanese motorcycle makers are curtailing production as demand in the U.S. and Europe continues to cool due to the economic downturn.

Total domestic motorcycle output came to 1.67 million units in 2007. Slightly more than 20% of those bikes were sold in Japan, and nearly 60% were exported to the U.S. and Europe. With sales of 250cc or larger motorcycles making up a high proportion of sales in the two regions, the production cuts are focusing on those products.

Honda has downgraded its fiscal 2008 production plans in Japan to slightly less than 400,000 units, down 10% from a year earlier.

Yamaha has lowered its production schedule for 250cc or larger motorcycles at its main factory in Iwata, Shizuoka Prefecture, to 350,000 to 360,000 units, a drop of 20% from fiscal 2007. The company also plans to trim production in Italy by the end of the year because of sharply falling sales in Europe.

Suzuki has decided to reduce total domestic output of motorcycles and buggy carts by 7% to 509,000 units this fiscal year. The company sees its motorcycle sales in the U.S. declining 19% from a year earlier to 100,000 units in fiscal 2008.

Motorcycle sales have also been decelerating in Japan since the beginning of the year. Honda, Yamaha, Suzuki and Kawasaki collectively shipped 680,000 motorcycles last year in Japan. For the current year, the number is projected to slide by 20% to below 600,000 units, less than one-fifth of their aggregate output during a peak in the 1980s.

Facing the prospect of a prolonged sales slump in Japan, the U.S. and Europe, the four Japanese motorcycle makers are stepping up efforts to bolster their operations in emerging economies in Asia and South America.

Honda plans to increase its fleet of motorcycle dealerships in India by roughly 40% to about 5,000 over the next three years or so, with a focus on small stores. Thanks to its active business expansion in India, Southeast Asia, South America and elsewhere, Honda has more than doubled its motorcycle sales in emerging countries in the last 10 years.

Emerging markets have also become the biggest revenue source for Yamaha, Suzuki and Kawasaki.

Small motorcycles, whose profit margins are thinner than those of larger products, make up high portions of their sales in emerging markets. Because price competition with local makers is intensifying, the Japanese motorcycle manufacturers are facing the need to bolster sales networks and transfer low-cost production know-how to their local factories to ensure success in those markets.

Source: Nikkei Net