India Yamaha Motor to hive off sales and marketing function into new unit to reduce costs and break into profits
India Yamaha Motor, the Indian arm of Japanese bike maker Yamaha, has decided to hive off its sales and marketing functions into a separate entity in a bid to reduce costs and break into profits.
With the expanding manufacturing footprint, product portfolio and the sales outlets, the top management felt, it makes sense to have separate entities managing functions of manufacturing, sales and R&D.
ET learns, the sales entity, to be called Yamaha Motor India Sales, will be headed by Masaki Asano as its managing director. India Yamaha Motor will manage the manufacturing function and the new R&D centre, will be managed by a separate entity, details of which are not known as yet.
Roy Kurian, national business head sales at Yamaha Motor India Sales confirmed the development. "This will help us in having clear focus. We just have to sell and the manufacturing operation will be managed by the existing entity," he told ET.
He said that apart from creating a clear focus on various functions, the company is looking at reducing cost and boosting its margins through this move. "At the existing price points, we are not getting the margin that we think we should get, but this is all going to change. There are whole host of cost-cutting initiatives being undertaken to boost margins," Kurian said.
"This move will definitely improve the profitability. We are hopeful of improving our margins by 50-60 % in the coming years," he added.
Yamaha's sales have been rising, but it has been incurring losses year after year. The accumulated losses for the company stood at Rs.1,358 crore at the end of 2011.
In 2011, it reported losses of Rs. 241.66 crore, down from Rs.632.31 crore loss in 2010. Through its organisational restructuring the company is aiming to break into profits in 2013.
The manufacturing company will focus on improving operational efficiency and reducing input costs while sales company will focus on building brand and selling bikes.
People close to the development say India Yamaha Motor is aiming to reduce cost by at least 5-10 % by negotiating with vendors for lower price and using common parts across products among other measures.
The decision to hive off sales was taken in January and the new set up will start functioning in the next couple of months. The headquarters of the sales company is expected to move to Chennai.
This is the second instance, where Yamaha Motor Corporation is creating a separate sales entity for the Indian operation. In the past too Yamaha Motor India Sales existed, but was transferred to the manufacturing entity India Yamaha Motor Private Limited for due to operational reasons.
The company is also in the process of setting up an R&D centre, which will help the company design, develop and source locally, which will further help the company to bring down the cost. The R&D centre is likely to come up in the next couple of months; however the first indigenised model will take at least two to three years for Yamaha to develop.
India Yamaha Motor is investing Rs 1,500 crore in an all new plant in Chennai, which is expected to come up by While the company has been maintaining a market share of around 3%, with slew of scooters and an executive segment motorcycle lined up for the next couple of years, the company is well on its way of its stated target of achieving 10% share in the next 3-5 years.
Despite a tough 2012, wherein Yamaha grew by mid-single digit, for 2013, it is eyeing over 40% volumes growth of 5 lakh units led by Ray scooter and an additional new scooter. Of this 5 lakh target, Yamaha expects almost 2 lakh units to come from the Scooter segment.
India Yamaha Motor registered a 6% growth in 2012 at 4,87,290 units versus 4,60,815 units in 2011. The domestic sales of India Yamaha Motors increased 1.4% with sales of 3,48,406 units as against 3,43,466 units during 2011. Exports grew faster at 21% with the company shipping 1,38,884 units in 2012 versus 1,17,349 units for the same period in 2011.
The company has more than 400 dealers spread across the length and breadth of India and plans are afoot to increase these dealership networks to 2000 by 2018.