Honda Expands Indonesian Market
In a recent press release, Honda Motor Co. executives announced the company aims to expand its share of Indonesia’s big motorcycle market to 60 percent from 46 percent before the decade is up by increasing its edge over arch-rival Yamaha Motor Company, the chief of its Indonesian venture said.
The move puts Honda in the position to vastly expand its Indonesian dominance as well as its OEM operations.
Honda, the world’s top motorcycle maker, increased its annual output capacity in Indonesia to 4.3 million vehicles in July from 3.5 million at the end of last year, scrambling to keep pace with surging demand, according to the release.
Indonesia is the world’s third-biggest two-wheeler market, having grown by about 40 percent in the past five years to 7.355 million in 2010 on the back of steady economic expansion and rising income in a country with virtually no public transport system, according to the release.
Of the percentage reporter, Honda officials say the company has shipped 3.416 million, giving it a market share in Indonesia of just 1.2 percent more than Yamaha. But that number is expected to rise exponentially over the next few years, officials said.
“We expect demand to continue growing, and reach 10 million within the decade,” Yusuke Hori, president director of PT Astra Honda Motor, told a small group of reporters at its newest factory near Jakarta on Saturday.
“By then, we want to own 60 percent of the market.”
That kind of growth would require more production facilities, OEM and aftermarket entities less than two years down the line, Hori said, but he declined to elaborate, according to the release.
With full overtime usage, Honda would be able to build at least 5 million motorcycles a year with what it has now, he said.
For 2011, Honda is aiming for a 53 percent share of the market with sales of 4.3 million motorcycles out of an expected 8.10 million market, Hori said.
Honda had trailed Yamaha in launching automatic transmission models in Indonesia as that market grew from just 4 percent in 2005 to 45 percent last year, forcing it to cede its top spot for several months at the start of 2010, according to the release.
That sent its Japanese headquarters into crisis mode, culminating in the appointment in April 2010 of Hori to head Astra Honda, the 50-50 joint venture with local conglomerate Astra International .
“The first thing I did was visit 90 dealers in 12 major cities over three months,” Hori said.”The decision to add more capacity came quickly, after one month of being here, because I knew that was the main reason we had fallen behind.”
Hori said Honda had also been able to offer more attractive products in the past two years thanks to a strategy of procuring components from the cheapest country in its global network.
Through what it calls “global procurement”, Honda has been able to cut costs by 9-14 percent on several new models, importing some parts from suppliers in China and India, Hori said.
“That’s allowed us to add more features to our products at the same prices,” Hori said.
U.S. based OEM and aftermarket manufacturers for Honda motorcycles will likely ramp up their Indonesian-based facility output in order to meet the demand officials say will come for Indonesian-made motorbikes.
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