Escorts Yamaha

Topics: Haryana, Yamaha Motor Company, Valentino Rossi Pages: 5 (1605 words) Published: October 9, 2011
Escorts - Yamaha Motors parting ways

The case traces the various developments from the time the joint venture took place till the breakup in 2000.Starting from1995, how the 50:50 joint venture (EYML) moved to Escorts divesting 24% equity to Yamaha Motors in mid 2000 making Yamaha Motors a majority stakeholder in the venture (74:26) to Escorts pulling out of the joint venture. Then Yamaha setting up a joint venture with Mitsui and Co. to produce motorcycles in India with the new venture called India Yamaha Motor Pvt. Ltd. The case also discusses whether the new JV is really a solution to Yamaha’s problems (failure) in India and what were the actual problems with both the companies

Escorts, Yamaha Motors, Mitsui and Co., EYML, India Yamaha Motor Pvt. Ltd

Yamaha Motors entered into a technical support agreement with Escorts in 1985 for starting the local production of Yamaha motorcycles. Yamaha and Escorts signed another contract in 1995 forming EYML to manufacture and market motorcycles in India with each company investing 50% of the capital for the original venture. EYML manufactured Rajdoot motorcycle at Faridabad and the RX and four-stroke YBX series at Surajpur plant. In 1996, Escorts transferred its motorcycle manufacturing facility at Faridabad to the joint venture. Plans were to modernize and upgrade the Surajpur and Faridabad facilities with a Rs 3.75 billion budget. EYML would launch upgraded versions of the current high performance bike, RX 100, and RXG 135 to meet stringent emission norms. In 1997, a further upgraded RXZ 135, a sleeker version would be launched and the 4 stroke YBX 125 would be launched in February 1998 to meet the growing demand for fuel-efficient bikes. YBX 125 would deliver the best of both worlds-performances along with fuel efficiency. EYML also planned to launch 2-3 product variants every year. In April 2000, Escorts announced that it was likely to sell around 20% stake in EYML to Yamaha Motors and become a minority shareholder however it would not exit from the joint venture. Anil Nanda, chairman, EYML said "I have no intentions of selling off the entire stake to Yamaha. Escorts will retain the 26 per cent stake we now hold in the venture." In late April 2000, the board of Escorts approved the proposal to divest 24% equity making Yamaha Motors control the management of the joint venture. Finally in May 2001, Yamaha Motors made a deal with Escorts, acquiring its 26% shareholding in EYML for Rs 700 million marking Escort's exit from the joint venture and making Yamaha Motors 100% stakeholder in the company. "We would like to get out of businesses where we are not in the driver's seat and in the case of Yamaha technology it was not a part of our expertise." said Nanda Commenting on Escorts' exit from the joint venture This made Yamaha set up a joint venture with Mitsui and Co. to produce motorcycles in India.Yamaha planned to replace its money-losing bike business which has had losses since at least 2001, with the new venture called India Yamaha Motor Pvt. Ltd. The tie-up followed Mitsui, Japan’s second largest trading company, buying a 3% stake in Yamaha and taking a 30% stake of total planned capital of Rs560 crore in the venture, which will use the factory and office facilities used by Yamaha Motor India at Surajpur.

Problem with Yamaha
The mere mention of the brand name "Yamaha" evokes a feeling among bike lovers which is diffcult to describe. The legend of its yesteryear superstars namely the RD350 and the RX100 still manages to overshadow the fact that Yamaha India has made straight losses since 2001.

There are many bikers around in the country who still venerate the Yamaha brand. It wouldn’t be surprising if many of them have never owned a Yamaha before. Such is the equity of brand Yamaha in India.

Yamaha happens to be the World number two in terms of two wheeler sales after Honda. But in spite of having its presence in India...
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