Honda’s Next Move To Drive Revenues For Its Motorcycle Segment

March 30th, 2017 by Trefis Team
-5.81%
Downside
34.45
Market
32.45
Trefis
HMC: Honda Motor logo
HMC
Honda Motor

According to our estimates, the Motorcycles, ATVs, and Water Motors segment accounts for nearly 16% of Honda Motor’s valuation and the company generates nearly 14% of its revenues from this segment. We expect Honda to retain its global motorcycle market share of around 33% over our forecast period.

We expect the global demand for motorcycles to increase steadily from 60 million units in 2017 to nearly 90 million units by the end of our forecast period.

This increase is likely due to rising standards of living in emerging economies and low penetration of motorcycles in countries such as India and Brazil. Fast growing populations in emerging markets with more disposable income is likely to increase the global demand for motorcycles.

Relevant Articles
  1. Growth Of Chinese EV Players A Looming Threat For Honda Stock?
  2. What’s Happening With Honda Stock?
  3. Honda Stock Looks Like A Buy Following Strong Q3 Results
  4. Is Honda Stock A Buy As Motorcycle Business Shines?
  5. Is Honda Stock A Buy At $27?
  6. Forecast Of The Day: Average Price of Honda Vehicles

However, we expect the average price of a Honda Motorcycle to decline over our forecast period, as it derives a greater proportion of its revenues from the sale of cheaper motorcycles in developing nations.

As it continues to focus on its motorcycle segment, recently, Honda announced that it is developing a global middleweight motorcycle in India to compete with the popular Royal Enfield model of Eicher Motors in the country. The company also plans to export this mid-sized motorcycle to Japan if it is able to produce it per plan in India. Middleweight motorcycles have engines between 250-750 cc and Royal Enfield dominates this segment in India. The country is witnessing a rising demand for vehicles in this segment with rising affluence in the region. Honda plans to compete with Royal Enfield in this segment. The company already has the technology and two bikes in this segment Rebel 300 and Rebel 500 are already being sold in the U.S. Honda is a known brand in India, and we believe with its expertise the company should be able to compete effectively with Royal Enfield in the middleweight motorcycle segment in India.

Motorcycles is an important segment for Honda Motors and most of the growth in this segment is likely to come from emerging markets. While the average price of its vehicles is likely to decline over our forecast period, we believe entering the middleweight market segment will give the company a stronger hold over countries such as India and Japan. This strategy should drive revenues for the company in the long term.

Understand How a Company’s Products Impact its Stock Price at Trefis

View Interactive Institutional Research (Powered by Trefis):
Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap
More Trefis Research