West Asia crisis impact on Indian industry won't be long-term: Hajime Aota

The first product to come to India will be the Yamaha EC-06, which we are going to sell in limited cities and dealerships initially

In January, Hajime Aota took charge as chairman of Yamaha Motor India Group. In an interview with Shine Jacob at the company’s Chennai office, Aota discusses the road map, which focuses on the performance segment rather than the mass market, restructuring efforts, electric vehicle (EV) strategy, and the impact of geopolitics on the Indian auto sector. Edited excerpts:

 

What are your priorities heading a complex market like India? 

In the past five or six years, we have been doing better after focusing on the high-premium segment. That means we are not chasing volume, we are chasing profitability. The biggest priority for me is the profitability of the Indian operations. To do that, we have two options — one, making more attractive products, and having enough capability for cost reduction on the manufacturing side. That means we have to invest in the mid-to-long term.

 

My focus is also on human capital, and this market produces over 20 million two-wheelers every year. If you look at the Japan market, you see very few motorcycles running on the streets. Human capital investment is also about sustainability, basically, people who can sell and make motorcycles. We have committed to 10 new launches, including two EVs this year.

 

In 2018-19, you decided to focus on the premium segment when your company was in a difficult spot. However, you are better placed now in terms of revenue through stronger performance in the premium category. What is your future road map? 

My management was looking to focus on the premium segment and create a new market. Now, we have a premium segment space, and everybody is entering this space. In the past, we were brave to jump into this segment. The challenge for Yamaha is to step up our premium segment and come up with what customers want. That is the story we want to create, with higher success rates of better products, or else, we will not be able to compete with our rivals.

 

We have to find out the favourites of Indian customers. I have to put big money in one basket for this. From a management point of view, if I can do this within 24 months like we did with the EVs we are going to release this year, I can run this company better.

 

What is your EV and hybrid strategy in India, given the competition from aggressive startups? 

The first product to come to India will be the Yamaha EC-06, which we will sell in limited cities and dealerships initially, as I need a perfect service structure to satisfy my customers. Another is the Aerox E, which is expensive, as we want to develop customers who want to differentiate themselves from other products. More products are expected.

 

I was in a strategy position before, and what we understood is that India is the only country where I can see double-digit growth in electrification going forward. This country’s gasoline price is high compared to competing countries. Our original plan was to make EVs somewhere outside, but I said we need manufacturing capability here. The most important part about Yamaha is that we cannot ignore after-sales service because the lifecycle is going to be shorter for EVs. I wanted to improve the life of my products for as long as possible.

 

How do you see the West Asia crisis impacting the two-wheeler industry? 

The biggest impact for me will be a possible hike in interest rates, as financing competitiveness will be lower for my customers. That may lead to slightly lower demand. Other than financing, a gas price hike will not have any impact on the purchase of motorcycles.

 

On the raw material side, my concern is aluminium. We are buying a lot of aluminium scrap from outside, and hence its prices may go up. Similarly, bauxite may also be affected. Another impact will be on freight costs. I believe this impact is not going to be long term. We don’t have much export to African countries. We have 59 countries in our export basket, mainly countries like Brazil, Mexico, and neighbouring countries such as Nepal, Bangladesh, and Sri Lanka.

 

How are you trying to develop the EV ecosystem, such as battery manufacturing, semiconductors, and charging stations? 

In Yamaha Motor, our research and development cost is less than 5 per cent. If I am looking at semiconductors and batteries, R&D cost will easily hit 20 per cent of the entire annual sales. However, there are a lot of people who are good at it, and I don’t have to worry about it.

 

Motorcycles will be developed in India, as 25 million people will be buying motorcycles every year, and naturally, investments will come into this country. The financial sector is watching this country as a growing power; that means money and capability will come here. The entire volume of Yamaha is not enough to run battery units. To develop charging infrastructure, you also need government support.

 

You had a restructuring in the Indian market recently, merging a few entities. What was its advantage? 

We had a complicated structure, and the first idea was consolidation to make governance and risk management easier. This was prepared two years ago. This will help shorten decision-making time. I can simplify the way of working by bringing four companies into one entity.