Honda Motor Co. has decided to cut prices of motorcycles due to prolonged deflation. With the demand for better bikes combined with environmental friendly components, the price of Honda motorcycles has risen by 10% to 20% to cover the production costs. But with the years, the already sluggish sales rate of motorcycles has dropped lower with the disinterest of the younger generation in motorcycles.
In order to revive its customer base and rejuvenate the youth’s interest, Honda has taken the Decision. The prices will be slashed by 20 to 30% bringing them down to what they were in 2000 for the same motorcycles. For instance, price of the ty will be cut down by Yen 40,000 while its least expensive scooter, the 250 cc Honda Forza will face a price slash of Yen 120,000. Prices will be cut gradually when each model undergoes minor changes or new cheaper models are released. Critics interpret this as a clever way of saying that their motorcycles will be made using cheaper parts, lowering the quality.
In order to make up for the low cost, Honda plans to increase its production numbers in Asia as well as America and Europe. Honda’s decision will induce fierce competition in the motorcycle market. With the motorcycle segment of Honda dropping by 27.1% in 2009 from the previous year, Honda’s 48% share in Japan’s market will witness a big blow if this solution does not work out to expectations.