By Makiko Kitamura and Tetsuya Komatsu
March 3 (Bloomberg) -- Vanida Paipong, a 33-year-old noodle factory worker in Thailand’s Ubon Ratchathani province, pays installments of 5,000 baht ($140) a month on her 100cc Honda CZ- i motorcycle. She bought the bike in February after her last Honda motorbike lasted 10 years, hauling friends and family over dirt roads, without needing much maintenance, she said.
“That motorcycle was worth every baht,” said Paipong, who said the sticker price on the CZ-i was 38,000 baht. “I was willing to pay a premium to buy a Honda.”
Surging unemployment in the U.S. and Japan, Honda’s two largest markets, has smothered demand for $22,000 Accord sedans and $28,000 Pilot sport-utility vehicles. Incoming president Takanobu Ito, who commutes to work on a 546,000-yen ($5,600) Honda XR250 Baja motorbike, will have to rely on new motorcycles in Southeast Asia to avoid the losses plaguing Toyota Motor Corp. and Nissan Motor Co. -- neither of which make two- wheelers.
“Motorcycles are more resilient against a recession than cars because these products are used in Asia for people’s main mode of transport,” said Makoto Haga, president of Tokyo-based hedge fund Wing Asset Management Co. “Motorcycles give Honda an advantage over its rivals.”
On the Edge
Honda, the world’s largest motorcycle maker, is expected to post a profit of 18 billion yen ($185 million) next fiscal year, according to the median of 19 analyst estimates compiled by Bloomberg. Toyota may post a 121 billion yen loss and Nissan may bleed 290 billion yen, according to analyst estimates.
“The company’s earnings will teeter on the edge of a profit or loss,” said Yasuhiro Matsumoto, a credit analyst at Shinsei Securities Co. in Tokyo. “Motorcycle sales could help the company eke out a profit.”
President Takeo Fukui said in an interview he expects profit from the motorcycle segment, which will account for half of Honda’s earnings this fiscal year, to “rise significantly” next year.
Honda fell 1.3 percent to close at 2,285 yen in Tokyo. The stock has climbed 20 percent this year compared with a 5.3 percent rise for Toyota and a 5.3 percent drop for Nissan.
Closing Marysville
The introduction of the new Wave 110i small motorcycle in southeast Asia may add to this year’s 10 percent sales growth for the segment. Honda expects to sell 400,000 of the bikes a year in Thailand, where it costs 34,000 baht. The company is also aiming to boost its market share in the country to 90 percent from 68 percent. The overall motorcycle market grew 6.5 percent last year.
Asia was also the only region where Yamaha Motor Co., the world’s second-largest motorcycle maker, boosted sales last year. The company’s profit tumbled 97 percent to 1.85 billion yen. Suzuki Motor Corp. also forecasts a profit in the year ending March, helped by sales of motorcycles and minicars in India, its biggest market.
“You see four people piled on to a motorcycle in those countries,” said Yuuki Sakurai, general manager of financial and investment planning at Tokyo-based Fukoku Mutual Life Insurance Co., which manages $54 billion in assets. “With road infrastructure having a long way to go in countries like India, motorcycles make more sense than cars.”
As Honda expands in emerging markets, it’s shutting down a motorcycle plant in Marysville, Ohio, its first overseas facility, by June. The move effectively ends Honda’s production of motorcycles in the U.S., where demand for large leisure models has dwindled.
Declining sales also caused Harley-Davidson Inc., the biggest U.S. motorcycle-maker, to report a 58 percent drop in fourth-quarter profit. The company, which earned 72 percent of sales in the U.S. last year, is slashing 1,100 jobs and shuttering three facilities, it said in January.
Daily Commute
Honda started selling the 110i in Thailand in January. It hasn’t given targets yet for sales in Indonesia and Vietnam, where the motorbike will be introduced later this year.
Anugra Akbar, a 26-year-old information technology worker in Jakarta, bought his CS1, in January from Honda. He rides the bike 20 kilometers (12.4 miles) to his job in West Jakarta.
A motorbike “is more efficient with the bad traffic in the city,” he said, adding that he chose the CS1 for its “futuristic style,” engine and good handling. The bike’s price was 17 million rupiah ($1,400).
For the year ending in March, Tokyo-based Honda, which started as a motorcycle maker in 1949, forecasts profit will plunge 87 percent to 80 billion yen. Even with the drop in car sales, Honda’s profit estimate beats the 450 billion yen operating loss forecasted by Toyota and 265 billion yen deficit at Nissan.
All the carmakers are suffering as U.S. industrywide auto sales may plunge to a 27-year low of 10.5 million units this year, according to General Motors Corp. The drop in demand in the U.S. has forced GM and Chrysler LLC to turn to the U.S. government for more than $17.4 billion in aid.
“The four-wheel business looks very grim,” Honda President Fukui said last month. “But motorcycle demand in emerging markets is resilient.”
To contact the reporter on this story: Makiko Kitamura in Tokyo at mkitamura1@bloomberg.net.
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