Honda Australia's general manager, Tony Hinton, has applauded the local motorcycle market for its stubborn resistance to the GFC firestorm, but has cautioned that future growth is largely dependant on how fast the American economy recovers from its deep hole.
"We think the local economy is quite strong, but unfortunately for our business we are caught in the slipstream of what happens in the US, Japan and probably Europe," said Hinton. "All the big motorcycles that are purchased come from those developed countries. If the US market doesn't have demand, our factory capacity starts to drop off and our per unit costs starts to drive up.
"There is just pressure on everyone, and we are looking to the US to pick up. "Despite the many challenges we are still facing, we see the market steadily increasing, to the tune of about 2-5 percent per year over the next four years."
Hinton believes the Australian market has been more resilient to the GFC than other markets, even though Honda Australia and its dealer network are still feeling the pinch.
"The Australian market dipped about 14 percent in 2009, but when you compare it to the US and UK they were down 40 and 20 percent respectively. And the good news is that we are getting out of it better than those markets.
"In Australia, there are 5.5 sales per 1000 head of population, in the UK it's 1.9 and in America it's 1.7 - which has declined rapidly. All I can say is that we are doing a better good job under the current circumstances.
"One of the things awe are open to the whole time is exchange rate volatility. Honda purchases product not only in Yen and US dollars, but we also buy from Thailand and Brazil from time to time.
"The Australian currency is boutique and we ride a wave up and down the whole time. That impacts upon our business profitability and also the prices that we have to put product into the market for.
"One thing another impact the market over the next four years will be fuel prices. There will be another benchmark they have to break through when it gets to $2.00 and what the community does for its transport needs.
"There is a commuter market that will continue to grow in Australia as we see people look for alterative methods of transport. Even though in 2009 the scooter market took a pretty big hit, it's our view over the next four years the commuter market will continue to develop based up some of the price rises."
Even though the Australian market held up comparatively well in 2009, the 14 percent decline in 2009 still had a major impact on the retail sector and its profitability.
That's why the issue of rationalisation of Honda's dealer network has now become such an acute issue.
Honda has been championing - and actively pursuing - rationalisation of its dealer network for the last 10 years. The logic is simple: less retail outlets to do more work.
"We started with 220 dealers in 2000, and right at the moment we have 164. We want fewer dealers to do more so there is profit for the dealer," said Hinton.
"One of the biggest issues facing the industry is dealer operating costs. If you look at the cost of real estate in Sydney and Melbourne, to go and put on a million dollar building and try and get a return out of motorcycles is extraordinarily difficult.
"You need to be very clever to get a return and it's been very difficult over the last 12-24 months for them."
Published : Friday, 5 March 2010