It times of economic distress, be a motorcycle producer, a Japanese one. In the outgoing fiscal year, motorcycle volumes dropped dramatically to their 8-year lows; declining 4 percent year on year, and 39 percent compared to the industry peak during FY21. Atlas Honda announced its financial performance for the last quarter of this fiscal year (or 1QMY25 in the case of ATLH as it follows a different financial year) and saw its profits soar; up 117 percent year on year after paying 38 percent tax on earnings. That’s impressive.
What’s even more impressive is that the company’s volumes during the quarter rose only 18 percent compared to the period last year. In the last eight quarters, the company has not only dominated the market, it has pretty much eviscerated all competition; its market share in terms of volumes averaging 88 percent. When other motorcycle assemblers struggled with supplies and parts imports, Honda was able to serve demand owing to a higher degree of localization or domestic supplies.
One reason for improved and sustained profitability is higher prices. By comparison, its revenues and costs per unit of sale (this is an estimated number) rose 13 percent and 7 percent respectively in 1QMY25 year on year. Revenues grew much faster than costs did due to higher prices.
The company certainly boosts a reputation in the market—for being reliable in terms of longevity and costs, giving good value for money, better quality (than the competition), and as a result, having better resale. Its CD70 was introduced in 1984 and some 40 odd years later, it is still running on the roads of Pakistan, still popular, still being sold, now with a few tweaks to the earlier models. Then there are a host of other models in the lineup. Last year, the company launched new models as well as introduced an electric motorcycle, launch pending.
Multiple things work for Honda other than market prestige. Higher prices facilitated the bottom-line but so did a tight control on overheads and finance costs that are close to none. In 1QMY25, overheads as a share of revenue were only 2 percent. This together with other income—5 percent of revenue—boosted profits much. For reference, other income buttressed the bottom-line by 43 percent—in other words, more than 40 percent of the company’s before-tax earnings came from just doing good treasury operations. This used to be much lower before FY23.
Other motorcycle assemblers will likely be playing a catching-up game in the upcoming quarters as supply lines open up and demand for motorcycles picks up, but Honda might stay head and shoulders ahead. Though there isn’t too much innovation that the motorcycle industry has seen in the past few decades, the market size has expanded with the population and new players have entered the space cinching some of the market share enjoyed by the likes of Honda. For players to beat Honda, they will have to bring their A game, maybe in terms of prices, but definitely in terms of quality and technology. That’s really what’s missing.