Yamaha & Mitsui come together to produce bikes for India

Yamaha Motor, the world’s second-largest motorcycle maker, will set up a joint venture with Mitsui to produce motorcycles in India.

Yamaha plans to replace its money-losing Indian motorcycle business with the new venture, called India Yamaha Motor, the Japan-based company said in a statement filed in the Tokyo Stock Exchange today. The unit will begin operating in April. The motorcycle maker said last month it will invest $174 million in the next three years to bolster business in India, where its sales trail behind bigger rival Honda Motor. The tie-up follows Mitsui, Japan’s second- largest trading company, buying a 3 per cent stake in Yamaha Motor last year.

“The reason for dissolving the old unit is because it has had losses since at least 2001," Yamaha spokesman Takashi Kitagawa said at a press briefing on Wednesday. “The company will rebuild the unit with help of Mitsui."

Motorcycle makers are building more factories and introducing new models in India as economic growth boosts demand in the world’s second-largest motorcycle market. Yamaha had forecast motorcycle demand in India to increase to 9.1 million units in 2010 from 7.3 million units last year. The Indian unit posted an operating loss of 8.8 billion yen in 2007. Mitsui, Japan’s second-largest trading company, bought a 3 per cent stake in Yamaha Motor last year. The two companies set up a team to discuss joint programs including purchasing and distribution.

Tokyo-based Mitsui will take a 30 per cent stake in the new Indian venture, Yamaha Motor said. India Yamaha Motor will utilize the same factory and office facilities used by its predecessor Yamaha Motor India., the statement said. Yamaha manufactures motorcycles in the country at Surajpur, near New Delhi in the north. Yamaha currently employs about 2000 employees in India.