Here’s How Honda Motors Can Benefit From Its Partnership With Grab Inc.?

Recently, Honda Motors (NYSE:HMC) announced that it had signed a memorandum of understanding (MOU) with Grab Inc., to initiate discussions around collaboration in the area of motorcycle sharing services in South East Asia. Grab provides a ride hailing platform in South East Asia for taxis and motorcycles.  An increasing number of auto companies are adapting to the changing automotive landscape, which is moving towards a “sharing economy”. Consumers are less interested in owning vehicles and prefer to use them on a shared basis. This trend is visible in the motorcycle market of South East Asia and Honda Motors is looking to tap into this trend with its collaboration with Grab Inc. According to our estimates, the Motorcycles, ATVs and Water Motors division of Honda Motors accounts for more than 15% of its valuation.  This effort to increase its global market share in this segment through the recent partnership can impact the company’s valuation positively.

Launch Of New Mobility Services

Through the collaboration with Grab Inc., Honda Motors plans to work on new mobility services in the area of sharing by conducting experimental initiatives in South East Asia. These initiatives will leverage resources of both companies — Honda’s motorcycle line up and Grab’s ride hailing platform. The goals of these services are two-fold, both to mitigate traffic congestion in urban areas and to reduce emissions with clean-running motorcycle products. Motorcycles are the preferred mode of transport in South East Asia and Honda Motors is an immensely popular brand in the region. In Vietnam, the word “Honda” is used as a synonym for motorbike. Many potential new drivers in the region still own two-wheelers with motorcycle penetration rates at over 80% in Indonesia, Thailand, Vietnam and Malaysia. The popularity of motorbikes in the region prompted popular car sharing company Uber to launch its first motorbike service in Thailand earlier this year. Grab Inc. operates both an online taxi app and a motorcycle sharing service and the company is aiming for a market share of 50% in the cities where it operates by the end of this year. Honda Motors could benefit from its partnership with Grab as it looks at the future of motorcycle ownership in South East Asia.

According to our estimates, Motorcycles, ATVs and Water Motors account for nearly 16% of Honda Motors valuation and we expect the company’s global market share in this segment to remain steady at around 33% over our forecast period.

An increase in this market share can impact Honda Motors’ valuation positively. However the impact might not be significant given that this segment does not account for a very large percentage of Honda’s valuation.

As Honda looks to revitalize the growth of the motorcycle market in South East Asia, we believe its collaboration with Grab Inc. should work well in its favour. With an increasing number of consumers not looking to own vehicles but share them instead, partnership with ride hailing companies are critical for the long term growth of automotive producers.

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