Japan Post, Honda Test Electric Delivery Bikes

Japan Post Co., Ltd., and Honda Motor Co., Ltd., have signed a memorandum of understanding under which postal deliveries will be made using electric motorcycles instead of its current gasoline-powered delivery motorcycles.

PSR Analysis: Japan Post has 24,000 post offices and 85,000 delivery bikes, a very large scale program in the Japanese bike market. If the post office converts all of its delivery bikes to electric power, this move could stimulate similar conversions in the general motorcycles market. Although it will take some time to implement, this successful project could show that an electric motorcycle is suitable for home delivery projects. PSR

Hyundai, Kia Recalls Nearly 1.5 Million Vehicles Over Engine Issue

Hyundai Motor Co. and Kia Motors Corp. plan to recall 1.48 million vehicles in the United States, Canada and South Korea due to engine issues. It's the latest blow for the two firms already struggling in key markets. The recall could cost the two firms hundreds of millions of dollars, and each revives quality concerns at a time when Hyundai and Kia face a sharp drop in China sales and sluggish demand in the United States and South Korea.

The South Korean companies are recalling 1.19 million cars and sport utility vehicles in the United States, 114,187 in Canada and 171,348 in South Korea due to the engine issue that increases the risk of a crash, according to safety regulators in those countries. The U.S. recall involves Hyundai's Sonata and Santa Fe and Kia's Optima, Sorento and Sportage.

The recall could hit earnings with the recall costing each company as much as 250 billion won (U$220.19 million), said Koh Taebong, an analyst at Hi Investment & Securities. The companies declined to comment on the cost of the recall.

Source: Reuters Business News Read The Story

Source: Autoweek April 7, 2017 Read The Story

PSR Analysis: The engines in question are 2.0liter and 2.4liter fourcylinder Direct injected (GDI) units codenamed Theta II, which are used in a wide variety of Hyundai and Kia vehicles in North America and in South Korea. The affected engines were all produced before August 2013, according to Ministry of Land, Infrastructure and Transport, with the risk of stalling linked to metal debris in crankshafts, left over from the manufacturing process. Many of recent automobile recalls publishe by other OEMs are often solved by ECU program updates, but this is a recall of the cylinder mechanism in the engine itself. It may have a serious impact on both cost and branding. PSR

Honda Malaysia Rolls Out 600,000th Unit

Honda Malaysia achieved a milestone when its Pegoh plant in Alor Gajah rolled out its 600,000th unit. The car manufacturer also achieved 100,000 unit sales for the financial year ended March 31, 2017.

The dual achievement, Honda Malaysia said, marks a robust Q1 2017 for the company. The 600,000 units of production was achieved in 14 years. Currently, Honda Malaysia has two production lines in its Malacca plant; the second began production in 2014. The latest technologies used in the plant include automated smart welding and an international standard painting facility.

Source: The Star Online March 31, 2017

PSR Analysis: Besides this news, Honda doubled the production capacity of its continuously variable transmission (CVT), which is a driving part in automobiles in Indonesia this year. They invested US$ 12.45 dollars and strengthened production facilities. The currency rupiah has settled and the environment favorable for export continues, and they are trying to increase the supply to overseas factories and increase cost competitiveness.

In Indonesia, where Japanese OEMs account for more than 90% of the new car market, finished car factories aiming for domestic demand in the past few years have been investing one after another, but now the profitability is deteriorating with the prolonged depreciation of the rupiah. This is a rare large investment as an export oriented parts factory and it is consistent with the policy of the current administration aiming at nurturing export industries. These news are not only Indonesia but also shows the strength of Japanese OEMs in Southeast Asian countries. PSR

Akihiro Komuro is PSR's analyst in the Far East and Southeast Asia