Yamaha Motor India is taking a measured approach to actively expanding in the domestic electric two-wheeler market. Reasons for this include a strong dependence on imported battery cells, declining profit margins, and supply chain constraints, according to Hajime Aota, Executive Director of Yamaha Motor Co Ltd, on Thursday.
Speaking to journalists at the global launch event for the YZF-R2 model manufactured in India, Aota, who is also the CMD of Yamaha Motor India group, noted that the lack of a fully localized lithium-ion cell supply chain remains the main obstacle for global manufacturers entering the core electric vehicle segment.
He emphasized that despite efforts, cells and raw materials are still sourced from outside India. According to Aota, until domestic cell production and an integrated supply chain are established, cost optimization and supply reliability will remain significant challenges.
Aota pointed out that the battery requirements for electric motorcycles constitute about one-tenth the power of passenger cars, which makes justifying the creation of specialized local battery cell production solely based on two-wheeler demand difficult.
Impact of Transition to Electric Powertrains
Highlighting the impact on profitability, Aota explained that the shift from internal combustion engines (ICE) to electric powertrains fundamentally changes the manufacturing chain. He clarified that when producing traditional motorcycles, the company manufactures the engines itself, which generates the primary manufacturing value and profit. However, with electric vehicles, purchasing cells and motors from external suppliers reduces the automaker's role primarily to assembly, putting significant pressure on margins.
Aota also noted the difference in Yamaha's market position as a wholly-owned subsidiary compared to local companies whose shares are listed on the stock exchange. He stated that capital allocation must consider the expectations of global shareholders regarding profitability, rather than chasing short-term market share at the expense of financial results.
Regarding consumer adoption trends, Yamaha market research indicates that purchasing electric scooters in India is most often a pragmatic decision driven by family needs and intended for secondary household use, contrasting with Yamaha's primary focus on performance-oriented individual mobility.
Despite these short-term difficulties, Aota assured that Yamaha is actively studying its pricing strategy and considering alternative powertrain architectures. The company has invested in a French mobility firm to study clutch-based regenerative braking systems aimed at increasing efficiency without compromising motorcycle dynamics and handling.
Furthermore, Aota presented the company's forecast for the two-wheeler segment, covering production benchmarking, regulatory compliance, sales targets, and potential capital structure options.
Yamaha forecasts that total sales and production in domestic and export markets will exceed 1.1 million units in the current calendar year. This represents a growth of approximately 10 percent compared to the roughly 1.0 million units achieved last year. He added that sales volume will be higher in the second half of the year than in the first, thanks to the festive season. Nevertheless, rising raw material prices, especially aluminum, continue to put pressure on profitability, requiring a balance between price adjustments and absorbing input costs.
Domestic Market Dynamics and Regulation
Commenting on domestic market dynamics, Aota specified that Yamaha's overall market share of about 3 percent does not reflect its core competitiveness, as the company deliberately avoids the low-budget segment for daily commuting. He stressed that the market share figure for the entire motorcycle industry is not their main benchmark, as they do not participate in the low-displacement motorcycle segment (100-110 cc), focusing exclusively on the premium segment.
Discussing the regulatory framework, Aota expressed conditional support for India's ethanol blending program aimed at reducing crude oil imports, while calling on policymakers to ensure long-term regulatory stability. He stated that the company is pleased to support the transition to E20. However, if policies change drastically every two years from E20 to E30, manufacturers would have to completely redesign engines. A stable multi-year schedule would allow for optimizing engine development cycles and effectively amortizing investments. He also added that technologies such as Exhaust Gas Recirculation (EGR) under upcoming CAFE norms create significant cost absorption barriers for low-displacement two-wheelers.
On production quality matters, Aota noted that Yamaha is actively comparing its Indian operations with Indonesia—another major global production hub for the group. He stated that looking at future market growth, India is a high-growth and large market. Although the company is expanding capacity here, its goal is to bring Indian production up to Indonesian levels in terms of quality and technical optimization.
Yamaha's R&D department in India has grown to approximately 280 employees. This is supported by a continuous engineering exchange program that sends Indian engineers to the headquarters in Japan for one to two years to establish technical and production processes.
When asked whether Yamaha Motor India would consider listing on local stock exchanges to match local competitors and gain access to public capital, Aota acknowledged that this option had been considered at the group level. He noted that there are pros and cons to operating as a locally listed entity versus functioning as a wholly-owned subsidiary accountable to global shareholders, but declined to go into detail about timelines.
