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Thailand sees fierce competition in motorbike market

Publication Date : 22-02-2013


Although the Thai motorcycle market may be smaller than the Indonesian or Vietnamese markets in volume, in terms of quality and strategy Thailand plays a big role as major motorcycle manufacturers have all pinned their hopes on the country with continuous investment to expand production and set up R&D centres.

Many are of the opinion that the Thai motorcycle market has reached a stage of saturation, but it has not lowered competition among manufacturers. On the contrary, the competition is as fierce as ever despite the small number of major players compared to the automobile market.

In January, motorcycle sales in Thailand grew by as much as 20 per cent compared to the same month last year, with growth experienced in every segment.

The first major case in the industry in 2013 involves AP Honda, distributor of Honda motorcycles in Thailand. The Trade Competition Act Committee has finally decided to seek legal action against AP Honda for alleged unfair sales practices before the statute of limitations on the marathon case expires in April.

If the state's lawyers agree to pursue the case, it will be the first prosecution under the Trade Competition Act. The investigation has taken almost 10 years. AP Honda was sued by Kawasaki and Thai Suzuki Motor for pressuring its dealers to carry Honda motorcycles exclusively.

This is a case that is being closely followed, since Honda has been the market leader for as long as 25 years. Honda's fuel-injection engines are highly accepted by Thai consumers while heavy marketing has been carried out for every model. Honda has also been involved in relations marketing among customers and dealers, which also led to the marathon case it is facing.

Last year, Thai motorcycle sales hit 2.13 million - up 6 per cent compared to 2011 figures. Honda motorcycle sales alone reached a record 1.485 million - up 7 per cent compared to the previous year. This is the second consecutive year that Honda has broken its sales record. Its market share is 70 per cent, up 1 per cent. Honda has now accumulated sales of more than 20 million units in Thailand, which is the fourth country in the world to do so after Japan, India and Indonesia.

The company's success stems from its effective product strategy, pointed out AP Honda president Chiaki Kato. He said each Honda model has created history in Thailand - such as the Dream, Nova/Tena, Wave 100, Click and Scoopy-i.

Honda started 2013 by introducing five new models and launched a plan for excellence in every area. The company plans to reap sales of 1.55 million units from the projected 2.15-million market. Among the highlights are the MSX 15 mini street bike, Forza 300 large scooter and CRF50M motard.

Kato said the Thai economy is expected to maintain growth and stability.

"The launch of the five models is part of our strategy to offer products that are above market expectations, which is the initial measure in our 3-year mid-term plan," he said.

Kato said that for 2013, which is the last year of the mid-term plan, Honda is planning a large number of activities, including sports marketing. Honda is an official sponsor of Liverpool and Manchester United.

Meanwhile, Honda plans to increase the number of Honda Wing centres and Honda Wing shops to 1,250 this year.

AP Honda director Suchart Arunsaengroj stressed his company would go ahead with continuous business moves, including sales, marketing and investment.

Just last year the company spent 600 million baht (US$20 million) to start a big-bike production line in Thailand, he said.

"Actually the market share that the company has comes mainly from consumer demand. When we first started out we had a market share of only 20 per cent, but then our customer base started to grow due to the continuous product launches," he said.

Suchart added that Honda had invested as much as 850 million baht to set up an R&D Centre in Thailand, making the country its centre for automobile and motorcycle research and development, developing parts locally, and CBU vehicle testing. Honda's Thai R&D Centre serves customers in 18 Asia-Oceania countries.

According to the Land Transport Department, 180,153 new motorcycles were registered in January, up 20 per cent compared to the same month last year. This is due to the demand created from the market slowdown in early 2011, as well as the government's minimum wage increase that has resulted in higher purchasing power.

Honda registrations in January were 132,097 units, equivalent to a 73-per-cent market share, followed by Yamaha with 34,857 units (19 per cent), Suzuki with 5,060 units (3 per cent), Kawasaki with 4,604 units (3 per cent) and other brands with 3,635 units (per cent).

Yamaha, the market's No 2 player, may be far behind Honda with just a 20-per-cent market share, but it has been aggressive with its lifestyle marketing activities for the popular Fino model.

With accumulated sales of the Fino reaching 1.5 million, Yamaha is now giving away free gold necklaces for every purchase. The company is spending more than 100 million baht on this marketing drive.

Last year Yamaha achieved record sales of 490,000 units, which is the highest in 10 years, said Thai Yamaha Motor deputy managing director Praphan Pholthanavasit. Half of Yamaha's sales comprise motorcycles with automatic transmissions.

Yamaha had originally targeted sales of 600,000 units and a 30-per-cent market share last year but, Praphan said, the government's First Car Buyer Programme had a larger effect than his company anticipated.

"The lost sales were mainly due to the First Car scheme, with many of our customers deciding to purchase automobiles instead. We are not expecting a big recovery this year as vehicles under the First Car scheme are still being delivered," he said.

Motorcycle demand is expected to rise by 3 per cent to 2.2 million units this year, according to Praphan.

"Yamaha's target is 550,000 units this year, equivalent to a growth of 12 per cent," he said.

Yamaha will not only bank on new fuel-injection technologies that offer higher fuel efficiency but the company will also come out with unique motorcycle designs.

"We are also doubling our marketing budget to 600 million baht to achieve a 40-per-cent market share in the automatic-gearbox market and 12 per cent in the manual-gearbox market," he revealed.

Yamaha's sales network expansion will see the number of Yamaha Square outlets being raised to 666 outlets this year.

Praphan said that although the motorcycle market may seem saturated, there is still high demand.

"We can say that Thailand has gone far in development compared to other countries in Asean. But not long from now markets in other nations will catch up, but Thailand will continue to be one of our most important markets in the region," he said.

Market competition is expected to heat up further this year due to the introduction of new products in new market segments.

"Although there are just a few brands in the market, as much as 3 billion baht could be spent for marketing and advertising this year," he added.

According to an industry source, Yamaha may seem like it could be compared with Honda, but the other brands are still far behind.

"Honda has fewer rivals each day. Today Suzuki has only 5 per cent of market share and 50 dealers, along with internal problems after a major restructuring. So even if the product is competitive, Suzuki is still not strong enough to emerge a competitor. Brands from China are even further behind regarding funding and sales networks in Thailand. The Thai market has not accepted Chinese motorcycles all too well due to their quality and image that are far behind the market leader," he pointed out.

*US$1=29.8 baht


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