ADVrider.com
[[{“value”:”Yesterday, the editor of ADV Rider asked me to comment on whether “…motorcycles will be cheaper thanks to the collapse of the Yen?” in the wake of this week’s stock market selloff. The answer is no, but not because of anything happening in financial markets.
The reason why Japanese OEMs enjoy global domination, principally Honda but also manufacturers like Hero that grew out of Japanese joint-ventures, is largely due to the of the keiretsu supplier system. Unlike in American business culture, where manufacturers squeeze suppliers with continuous downward price pressure and threats of promiscuity, the keiretsu model seeks to build trust and long term mutual prosperity between supplier and OEM.
Japanese supplier contracts are almost exclusively model-wide, meaning that the selected supplier will continue to be the partner on that product as long as it remains in production, with the supplier invited to participate deeply in kaizen, or continuous improvement, of that product. Typically these contracts are strict on technical specifications but vague on price specifics, with component price targets set for the life of the contract, giving the supplier a free hand to find the most efficient method of cost cutting to them.
While keiretsu has evolved as Japan adapted to the 21st century economic reality of Chinese low cost manufacturing, the fundamental concept is the same: suppliers are long term partners to be invested in, not adversaries to abuse for short term discounts. Contracts are negotiated with the intent to build each other up, not knock each other down. Often, Japanese suppliers are partly owned by the OEM, or both supplier and OEM are partially owned by the same bank, one of Japans giant financial conglomerates.
Contingencies are built in to account for macroeconomic shocks, which are backstopped upstream by the the Ministry of International Trade and Industry (MITI) and the Bank of Japan. They literally cannot fail. Currencies fluctuate, energy costs balloon then collapse, political disruptions happen. But having constructive and stable relationships with flexible partners who have stakes in everyone’s success always wins.
This is why Honda sells 18 million motorcycles a year, and has been profitable almost every year since its creation, and why if you map out the inflation-corrected price of Honda 750cc bikes over the last four decades, they have cost you about the same while being considerably more motorcycle.
The answer to the editor’s question? When markets sink, motorcycles get more expensive to make for everyone except the Japanese or those with similarly responsible supplier relations. For everyone else it is lead balloon time.
Happy, safe motorcycling.
The post The Long Game: Motorcycle Prices vs Financial Markets appeared first on Adventure Rider.”}]]
