February 10, 2016
Hey, Wait a Minute.
The guessing game continues. Thinking a little time spent reflecting on a business model might not be a bad thing right now. Hopefully this may help put things in perspective for those with expectations beyond the realm of feasibility.
At the start of the current millennium, Yamaha made the decision to go 4-stroke as a company, not as a single product group. The idea was born at a level far above my pay grade so I can only speculate on the details. Yamaha looked at the reality of the global marketplace considering all products; marine, motorcycle, power equipment, recreational vehicle (including snowmobile) and scooters. The conclusion – four stroke technology is the best overall direction for Yamaha to offer clean, reliable, fossil-fueled power to meet the needs of the immediate future.
I was in the room when this strategy was introduced to the snowmobile division. At the time I actually believed we had a choice in the matter (I know). Anyway, we debated the pros and cons with great fervour. The deal breaker came when engineering provided information indicating the 2-stroke snowmobile engine would not survive the second round of EPA emissions standards in the US. This was based on the technology available at the time. And so it was, we were down on all fours. Ooops.
For the most part however, the direction has proven correct and the emissions clock is still ticking on the snowmobile anomaly, but lets pretend for a moment, that we could hit the snooze button and propose developing a new hi-performance 2-stroke engine. The first challenge is to justify a return on investment. To design, develop, tool and manufacture an engine (any engine) costs billions of Yen (millions of dollars). The total cost is amortized to be recovered over a fixed period of time, generally a couple of years. The best way to secure the investment is by showing a potential sales volume capable of off-setting the costs in the short term thus providing reasonable profits further down the road. OK, I’ll go on record here as saying the snowmobile business is not showing a lot of growth these days. None of the manufacturers are raking in the dough selling sleds, in fact its a damn good thing we have all diversified manufacturing to produce other motor sports products. This trickles right down to our dealers where you wont find too many that can exist selling snowmobiles alone.
This relationship to producing other motor sports product along with snowmobiles is key. The best way to increase the production volume of an engine is to put it in more than one product. You don’t have to look too far in our industry to see the results. Our competitors have justified their 4-stroke development by sharing engines with SxS / ATV / squirt gun and motorcycle (even the ones with ‘training wheels’). It’s good business. Yamaha has done this successfully for years and now it is a mandate. As a rule, our new engine development projects must have the ability to apply, at least in part, to more than one product group. Herein lies the quandary for new 2-stroke development. Where else could we apply a big two-stroke performance engine outside of snowmobile these days?
Before you jump all over me on this, think of the current markets. Look at personal watercraft, look at motorcycle (including dirt), look at ATV / SxS, look at outboard engines, (OK BRP is still trying but…). Point is – reliability, cost of operation, emissions, applications, warranty risk, longevity all out weigh (pun intended) the advantages of a 2-stroke in everything but snowmobiles, or so it would seem.
Now, all that said, I like 2-strokes. Always have – always will. When it comes to purchasing any of the above products, 4-strokes have clearly taken over. In my case, I own boats, ATV’s, motorcycles and they are all 4-strokes except for my old sleds and my beloved Husqvarna saw. One must concede – The future market for 2-strokes is not looking so good.
So, back to the business model: Mr Yamaha, we want to invest XX million dollars in developing a new 850 state-of-the-art, 2-stroke snowmobile engine. We plan to sell 12,000 over three years providing there is no change to emissions regulations under Mrs. Clinton and maybe you can make $200 profit each if we sell more. Oh, and we get slammed with a Polar Vortex every year during her term. And if you make a really good one – one that lasts as long as a four stroke, doesn’t burn any oil, get’s great fuel mileage, doesn’t go bang if it gets lean and accepts boost easily, we might be able to use it in another vehicle or two…
Wait, where are you goin?