Honda and Yamaha end war with scooter tie-up

Honda and Yamaha, the motorcycle makers whose rivalry became the defining case-study of blinkered Japanese belligerence in business, have declared an armistice and agreed to work together.

Discussions between the former foes, which each risked financial ruin in the quest to drive the other out of the Japanese two-wheeler market, could put Honda in the role of original equipment manufacturer (OEM) for Yamaha — a position that highlights the relative strength of the Yamaha brand.

Negotiations on an alliance, which were revealed in Tokyo on Wednesday and would only lead to the two co-operating on models for sale in the Japanese market, are expected to see the pair engaging in joint development of next-generation electric scooters.

The companies said the alliance had been struck in the face of “various challenges” including compliance with safety standards and emissions regulations, which they expect to become more stringent and financially onerous in coming years.

The rivals will continue to battle in the core Asian markets outside Japan with executives emphasising the collaboration will be limited to scooters — with a 50cc engine or electric motor — sold in Japan.

“We are not discussing about overseas. The area of collaboration is strictly limited to the Class-1 category and there will be no further expansion,” said Shinji Aoyama, Honda’s operating officer.

The peace talks, which would have been inconceivable in the 1980s when Honda’s corporate rallying slogan was “Crush Yamaha”, have been convened to address the rapidly shrinking Japanese market for motorbikes and scooters.

In 1981, when the two companies embarked on what would become known as the “H-Y War”, motorbikes and scooters were the aspirational purchase for Japanese youth — a symbol of freedom, affluence and Japan’s then soaring global reputation as a precision engineer. In their efforts to outdo the other during the early 1980s, Honda and Yamaha released dozens of models each year.

With the alliance now in the offing, and despite the historic use of the Honda-Yamaha rivalry as a case study in business schools, the companies appear eager to play down the single-mindedness of their old corporate tussle.

“Among ourselves, we’ve never once called it the H-Y War,” Mr Aoyama said. Katsuaki Watanabe, Yamaha’s managing executive officer who suffered a pay cut in 1983 when the company lost the battle, added: “Among the people who are left, there is no bad feeling left from the H-Y War.”

Today, Japanese sales of motorcycles have fallen 84 per cent to 372,696 units in 2015, according to the Japan Automobile Manufacturers Association. After the second world war, there were 50 Japanese companies making motorbikes but that number has dwindled to four. The motorbike “gangs” now visible on Japan’s roads tend to be enthusiasts in their mid-60s.

With the tie-up limited to the Japanese market, analysts anticipate the impact on the groups’ profitability to be limited. Still, the move will alleviate excess capacity at Honda’s plant in Kumamoto while saving costs for Yamaha, which exports scooters made in Taiwan to sell in Japan.

“It doesn’t make any sense for the two companies to waste time competing in a 400,000-unit market,” said Masahiro Akita, Credit Suisse analyst.

Additional reporting by Nobuko Juji in Tokyo