Escorts quits motorcycle JV with Yamaha

By , agencyfaqs!, na | In Advertising | June 13, 2001
Yamaha bought out Escorts' 26 per cent stake in the motorcycle JV, even as it completed the process of consolidating its advertising account with TBWAAnthem

agencyfaqs! news Bureau

Yamaha Motor Company has bought out the 26 per cent stake held by Escorts in the motorcycle joint venture formed in 1996. At a press conference in Delhi on Tuesday, the company announced the formation of its 100 per cent Indian subsidiary, Yamaha Motor India.

According to the newly-appointed managing director of the India operations, Masahiko Shibuya, the Japanese major had bought out Escorts for a total consideration of Rs 120 crore. Of this, Rs 70 crore was paid to Escorts for its 26 per cent stake in the joint venture, while the balance of Rs 50 crore was used for subscribing to preferential shares. The buy-out would be completed by June 30, 2001.

As part of consolidating its India operations, the company plans to strengthen product quality and improve cost competitiveness. Also in the offing is a reorientation of its 450-strong dealer network. Interestingly, the company has consolidated the advertising account for its motorcycles with TBWAAnthem. The process started in August last year when the company shifted the Yamaha YBX-125 account to TBWAAnthem from Headstart.

Talking to agencyfaqs!, R R Prasad, deputy general manager, marketing, said, "Crux will be the volume-driver for Yamaha in the near future. Over the next one year, we hope to spend 2.5 per cent of the turnover, that is, Rs 25 crore on advertising activities alone. And most of this will go into Crux. Brands like Rajdoot, that have a very different target audience, require a very different kind of communication effort. And so we would be doing a lot of below-the line activities for it."

Talking about the company's broad goals, Shibuya said, India has a very important market in the company's global scheme. "India is the second largest motorcycle market in the world. It has the potential to develop cost-competitive products. We don't not want to miss the opportunity," Shibuya said.

The company also announced its plans to launch at least one new model every year as a run-up to capturing a 21 per cent share of the Indian motorcycle market by 2003. In the current financial year, the company plans to sell around 3 lakh units, against the 2000-01 sales of around 1.7 lakh units. Plans are also afoot to make India a major export base for Yamaha's global markets. Shibuya said Yamaha has invested around Rs 550-crore since its entry into India in 1996. The company was likely to launch a new model, targeted at the economy segment, in the next one month.

When asked if the company was mulling an entry into scooterettes, Shibuya said Yamaha would consider entering the scooter segment in the country "if demand goes up substantially". He added, "Yamaha is the leading player in the scooter market worldwide. While there are no immediate plans to do so, we may enter this segment if and when we spot an opportunity."

S K Taneja, senior vice-president, Yamaha India, said the company expected to break-even in 2001-02. "Our volumes in FY-00 did not allow us to break-even," he admitted.

© 2001 agencyfaqs!