Scenes From Behind the Bamboo Screen: The Honda/Yamaha War
The debts were staggering—¥280 billion on a consolidated basis at the end of ‘81.
Toby Jack
These are all just random images.

Nick's book, which contains this story and many others is still on Amazon as an eBook for $3.

If you truly know your enemy and yourself you’ll never lose a battle. --Confucius

When I first arrived in Japan my first job was teaching English conversation at Hitachi headquarters near Yodoyabashi in Ōsaka. Every afternoon I would take the train from Kyōto to Ōsaka, where I’d spend a couple of pleasant hours chatting with Hitachi executives. Between the station and the Hitachi building was a small bike shop. Since they seemed to sell nothing but scooters I never gave the place much of a look. But one afternoon I couldn’t help noticing the prices of the new scooters lined up outside on the sidewalk: $275! This seemed like a ridiculously low price for a new scooter, but being new to Japan and all (and still walking around in a daze most of the time) it didn’t really register.

In fact, even if you were in the U.S. in the early eighties and were fortunate enough to be shopping for a motorcycle, you too had plenty of bargains to choose from. The dealers were awash with bikes. New models were coming out in astonishingly quick succession and leftover models were selling at fire-sale prices. Maybe you were one of the lucky buyers who picked up a discounted machine for half its original sticker price. Or maybe you were one of those buyers who paid full whack only to watch your bike’s value evaporate as ever-newer models quickly made it obsolete.

What we were experiencing were the effects of the Honda-Yamaha War, a brutal battle for supremacy between the world’s two largest motorcycle manufacturers. Virtually unreported overseas, in Japan it spawned a novel, a spate of magazine and newspaper articles, and even today serves as a classic example of a sales war to students of business.

In the West, it changed forever the buying habits of a generation of motorcyclists. In Japan it brought one of the companies to the verge of bankruptcy.


The war began in the late seventies. Hisao Koike, the president of Yamaha Motor Company, was sick of playing the eternal second fiddle to Honda. He watched Honda diverting ever more of its company resources to its growing automotive division and decided that the time was right to strike.

With the backing of Genichi Kawakami, the enigmatic chairman of Nippon Gakki (Yamaha Instruments), the parent company of Yamaha Motor Company, Koike set out to usurp Honda’s position as the world’s No. 1 manufacturer of motorcycles.

Yamaha moved slowly at first, concentrating on taking market share from Honda in select areas throughout Japan. This was done by lowering prices, increasing profit margins for dealers (particularly at multi-line dealerships), and by releasing a series of very stylish 50cc scooters for women.
Danny Coe

As buyers flocked to dealerships to snap up these fashionable low-priced scooters, Yamaha began to chip away at Honda’s lead. In 1976 Yamaha’s share of the domestic market rose to 30%, and in 1977 it hit 34%, only 9% less than Honda. Honda was slipping into range.

These developments were paralleled by massive investments in new production facilities by Yamaha, where an annual production goal was three million units. In a sales war, product is the ammunition and the guy with the most wins.

Dean F. Adams

The numbers tell the tale: At the beginning of 1975 Yamaha was producing one million two-wheelers per year. By 1981, at the height of the war, this figure had increased to just less than three million.

During the same period domestic shipments rose from 300,000 units to 1.3 million, and exports more than doubled from 700,000 to 1.6 million.

At first, Honda seemed unconcerned by the steady erosion of its market share. Most of Yamaha’s gains were in the low-profit 50cc classes, what people at Honda contemptuously called ‘bicycles.” Money was rolling in from the automotive division and sales in the 250cc-400cc market, where the bulk of profits were made, were almost unchanged.

However, when it became clear that Yamaha aimed to become No. 1, Honda struck back with a vengeance, marshalling huge resources of capital and technology which Yamaha could never hope to match.

Honda’s engineers responded with a breakthrough in motorcycle production technology: a new computer-controlled production system allowing small-volume, multi-model production on a single production line. Integrated with CAD/CAM design technology it drastically shortened the time from model conception to production.

Too, Honda realized earlier than most that motorcycle manufacturing was shifting from meeting needs for affordable transportation to satisfying the wants of an ever more materialistic society. In the future the company that presented the newest model in the shortest time would be the victor. The traditionally long time lag between design and production was no longer viable in a modern market where tastes change almost daily.

Then Honda brought out the big hammer. They began shifting resources from the automotive division back to the motorcycle division. New models began rolling off Honda’s lines in staggering numbers. By 1982, the last year of the war, Honda was bringing out one new model every week — 48 models in one year! For every new model released by Yamaha, Honda released two. And with the millions rolling in from car sales Honda could afford to cut prices to the bone.

All this was taking place far from U.S. and European markets. There, sales were booming like never before. And Americans bought big bikes: 750’s, 900’s. High-horsepower machines with big, fat torque curves and big, fat profit margins to match.
The U.S. market was the key in the bare-knuckle slugfest going on in Japan. It was in the U.S. market that Yamaha earned the profits that made good the tremendous losses being suffered at home. And it was those profits that were paying off Yamaha’s massive investments in plants and machinery.

Southern California 1981 — Yamaha’s dealer meeting opened in the bright California sunshine with a wave of enthusiasm never seen before. Thousands of dealers from across North America came for the introduction of ten new models, the most ever released by Yamaha.

Included were new YZ motocrossers, the V-Twin Viragos and many more. A test road was set up, service displays were operating and mood was festive. America was experiencing a motorcycle boom of historic proportions. Owning a dealership was almost like having a license to print money.

These annual gatherings of the faithful were more than just fun and games, though. It was here that preliminary orders for the coming year were taken. Based on these orders the production schedules and volumes for the new models would be determined. While the exact figures were never made public, it was rumored that Yamaha received orders for 280,000 machines, the most in the company’s history.

Back in Hamamatsu, President Koike and Chairman Kawakami were ecstatic. Since actual orders usually exceeded preliminary orders by 30%, exports to North America in the coming year could be expected to reach more than 350,000 units. Production was geared up to a frantic pace to meet the expected demand, and further loans for even greater production capacity were taken out.
A few weeks later Honda held its dealer meeting where they announced eleven new models. These including the revolutionary VFR750, the first Honda motorcycle to showcase the company’s advanced automotive engine technologies. Again, while the exact figure is unknown, Honda is said to have garnered orders for about 220,000 machines. As the magazines feverishly reported this avalanche of new technology from the two giants, motorcyclists around the country were giddy with excitement.

Only a few very astute observers saw the significance in the fact that for the first time in history Yamaha had received more orders than Honda. Yamaha saw the figures as proof that they were winning the war both at home and abroad. The folks at Honda saw the figures for what they were: the first signs that the market was cooling off.
DFA-- film!

Back at home, in January of ‘82, Japan’s Automotive Industry Association released the domestic sales statistics for the previous year. Of a total of 3.06 million units shipped by all manufacturers, Hondas accounted for 1.2 million (39.3%), while Yamaha racked up shipments of1.11 million (36.3%). A mere 3% separated the two giants.

Yamaha was now poised on the brink of its greatest accomplishment since the company’s founding. At the present rate Yamaha would soon overtake Honda as No. 1. As the factories in Hamamatsu worked overtime to crank out the bikes, President Koike and Chairman Kawakami hosted the hoards of journalists flocking to Hamamatsu to record the details of this historic achievement.

But in the months that followed ominous messages began arriving from Yamaha’s U.S. distributor. Orders were being cancelled, only a few at first but soon hundreds, then thousands. Again, exact figures were never released, but cancellations for 90,000 machines were rumoured to have been received. America was sliding into a recession and taking motorcycle sales with it. With them went the profits and the company’s ability to repay its debts.

Almost overnight, Yamaha was staring bankruptcy in the face. Tens of thousands of unsold machines were piling up in warehouses around the world. And on the home market Honda hammered away at Yamaha with a ferocity which, if it continued, would soon put the company out of business.

In the end, Koike had to go to Honda, humbly apologize for his
insolence and beg for an end to the war which now threatened his company’s very survival. Early in 1982, Honda acquiesced—they had made their point and order had been restored. It would be a long time before anyone would dream of challenging Honda again.


But while the war was now over, Yamaha’s problems were not. On the domestic market sales had plummeted in the face of Honda’s counterattack; overseas, the US recession — which was now becoming a world recession — knocked the teeth out of the export market. Production was cut back, but too late. The new facilities had done their job too well. In Japan alone, Yamaha had 500,000 unsold machines piled up in warehouses. Another 390,000 were warehoused in the U.S., and 110,000 more were slowly gathering dust in other overseas markets. The debts were staggering—¥280 billion on a consolidated basis at the end of ‘81.

Koike was fired in disgrace and Hideto Eguchi was given the awesome task of restructuring the faltering company. Layoffs of 3,500 employees were initiated, and production capacity was cut by half — reduced from 3 million units to 1.5 million. Protracted negotiations with the company’s main banks resulted in a ¥100 billion long-term unsecured loan for Yamaha — a courtesy extended to only the most favored companies (and an indication of the bankers’ astuteness in predicting future bike sales).

On the U.S. side, Sumitomo, one of Yamaha’s banks, approached Ford Motor Co. (Yamaha’s ties to Ford are too involved to discuss here, but the engine used in Ford’s Taurus SHO is built by Yamaha.) They succeeded in getting Ford’s financing company to assist Yamaha’s U.S. distributor dispose of its tens of thousands of warehoused machines.

Which brings us back to the beginning of this story and explains why there were so many bargains at dealers in the early eighties. Honda, Suzuki and Kawasaki did not escape unbloodied, either. With so many Yamahas selling for peanuts, they were forced to cut prices, too.

There was another casualty of this war, the customers, many of whom were badly burned in their purchases of Japanese equipment or simply got fed up with the incessant model changes. And once burned twice shy. For Harley-Davidson, the timing could not have been more fortuitous. Recently reorganized and with the new, much-improved Evolution machines just hitting the streets, they were perfectly positioned to take advantage of the legions of fed-up buyers (war victims?), many of whom vowed never to buy Japanese again. Ducati and others have profited, as well.

Today the war seems like bout of temporary insanity and memories of it have faded like a bad dream. Sales are once again booming worldwide, Yamaha is financially healthy again — and more responsibly directed — and all the Japanese manufacturers are enjoying strong sales.

Should you travel down from Tōkyō to Hamamatsu and visit the Yamaha factory — a nondescript collection of buildings on the outskirts of town — you’ll find they don’t like to talk about the war, nor is it polite to mention it. And when you visit Honda’s impressive headquarters building in Aoyama, one of the most exclusive areas of Tōkyō, the bland fellow from the PR department will smile politely when the subject comes up and downplay its significance.

But for a brief period in 1981, motorcycling history was in the making.

— ends —
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