May 14, 2012: India Yamaha Motor Ltd (IYML) has signed a Memorandum of Understanding with the Tamil Nadu government approving the construction and operation of a new two-wheeler factory on the outskirts of Chennai. The new facility will join Yamaha’s existing factories at Surajpur (UP) and Faridabad (Haryana) to meet the rising demand for two-wheelers in India, particularly scooters.
The new factory, which will have a shopfloor space of 114,000 square metres, will be housed on a 440,000 square-metre site in an industrial park in Vallam Vadagal on the outskirts of Chennai. While construction is scheduled to begin in September 2012, completion and start of operations are planned for January 2014. The planned investment in the new project is around Rs 1,500 crore over the next five years.
According to plans, the new factory will employ 1,800 people and have an annual two-wheeler production rate of 400,000 units at the start of operations. Production capacity will gradually be increased to a level of 1.8 million units annually by 2018, at which time employment is expected to reach 6,500 people.
The new factory will employ a ‘theoretical-value-based production’ concept that operates on a system of completely synchronised manufacturing of parts and assembly of complete two-wheelers. Furthermore, the new Chennai factory will be the first in the Yamaha Motor Group to have a ‘vendor park’ in its nearby vicinity that will bring together the production operations of main external parts suppliers, thus enabling complete synchronisation of external supplier parts production as well. This system will reduce losses in the areas of production management and distribution to extremely low levels in the overall engineering, manufacturing and marketing process, and make the new production base a highly efficient and profitable plant.
Commenting on the occasion, Hiroyuki Suzuki, CEO and managing director, India Yamaha Motor, said: “We are very pleased with this development as this is in line with YMC’s medium-term management plans of enhancing local production levels to meet the demand growth in emerging markets such as India and their export markets. The Indian two-wheeler industry has witnessed much growth in the last few years, attributable to increased disposable income levels among a rapidly expanding middle class. We expect the industry to attain 20 million units level by 2016 when we are targeting to sell two million units and achieve a 10 percent market share.”
“We would also like to thank all the concerned Tamil Nadu government departments, especially Guidance Bureau which had extended its complete support to this project by facilitating as a true single window body”, he added.
IYML targets 23 percent growth in 2012
The Indian two-wheeler market has continued to grow year by year and in 2011, demand exceeded 13 million units, making it the world’s second largest market. For IYML, aggressive introduction of new models in the 150cc-plus deluxe and premium motorcycle segments has contributed to a strong growth in domestic sales and exports. Total units sold grew from 380,000 in 2010 to 520,000 in 2011; the company has projected a 23 percent year-on-year growth to 640,000 units (domestic: 450,000, exports: 190,000) for 2012. Forecasts for the next medium-term management plan beginning in 2013 see annual sales of Yamaha two-wheelers exceeding the one million unit mark.
To keep pace with this current growth in demand, plans are also underway to augment the existing factory’s annual production capacity of 600,000 units to one million units with a Rs 750 crore investment this year. With the added capacity and the completion of the Chennai plant, IYML will have a combined two-wheeler production capacity of 2.8 million units by 2018.
Along with its motorcycle portfolio, IYML had showcased four scooters at the Auto Expo 2012 and is expected to roll out the stylish 125cc Ray around Diwali this year (pictured above with IYML top brass and brand ambassador John Abraham).
Yamaha’s focus on scooters is a smart move. The SIAM results for April 2012 show scooters marching way ahead in the two-wheeler segment with a growth of 30.29 percent, stepping up sales from 174,931 units in April 2011 to 227,924 units in April 2012. Exports were also higher at 54.09 percent with an uptick from 6,230 units in April 2011 to 9,600 units in April 2012.
IYML expects scooters to contribute 40 percent of its total sales for Yamaha by 2014 and the company hopes to target young collegians. The manufacturer is also mulling launch of a new 100-150cc bike in 2013-14 to compete in the mass segment where market leader Hero MotoCorp has its maximum offerings.