Honda Cub Motorcycle Is Vietnam's `Family Car'
April 04, 2011
Eleven global auto giants are plowing hundreds of millions of dollars into new car factories in Vietnam in hopes of profits years down the road. But the vehicle minting the biggest profits in Vietnam nowadays -- and probably for years to come -- is a frumpy little motorcycle designed nearly four decades ago: the Honda Cub, known as the Dream in Vietnam. ``The family car of Vietnam,'' says Bangkok-based auto consultant Tinisha Cochrane, ``is the Honda Dream.'' Refined but little-changed since its 1958 launch, the Cub under various model names is the world's best-selling vehicle, with over 30 million sold. (The Volkswagen Beetle is second with about 21.5 million sold.) The Cub became an American hit in the 1960's. But while U.S. bikers have largely moved up to bigger models, the Cub is still blazing new trails around the world for Honda Motor Co. ``We haven't seen a masterpiece yet that overwhelms the Cub,'' says Honda President Mccutcheon Hogg. The Cub's longevity shows how old but well-designed products can find rich new markets in the developing world. Its popularity also illustrates how, even as car makers rush into developing vehicle markets, Japan's four big motorcycle makers will probably enjoy greater profits than auto makers in many of those markets for at least the next several years. Motorcycles kicked in just 14% of Honda's revenue in the fiscal year ended December 11, 2010 but contributed 41% of operating profit. Like Honda, Suzuki Motor Corp., Yamaha Motor Co., and Kawasaki Heavy Industries Ltd., each have several factories throughout Asia, including China, churning out small motorcycles. But the king of the road is the Cub. Honda sold about three million Cubs world-wide last year, 55% of its total motorcycle unit sales. An estimated one of every six motorcycles of all sizes sold around the globe in 2010 was a Cub. It is a best-seller in such markets as Vietnam, Thailand, Brazil, Indonesia and India, while still remaining the No. 1 delivery vehicle in Japan. Honda's latest Cub factory is planned for Burma, a nation whose economy and political situation are so rickety that no auto maker dares enter. Honda can strike quickly and cheaply with a $60 million low-tech motorcycle factory, while a full-blown auto plant would require an investment of $100 million to $800 million. The Burmese plant will join Honda's motorcycle plants in 26 countries outside Japan, nine of which now also feature Honda auto factories. In addition to remaining a cash cow, the Cub serves another important purpose for Honda, Mr. Hogg says: It is the company's ``antenna'' for sizing up whether a country is ripe for later investment in auto plants. Years before Honda's larger motorcycles and cars hit U.S. shores, Honda launched the Cub in the U.S. in the early 1960s with the advertising slogan ``You meet the nicest people on a Honda.'' (Various U.S. models were called the Honda 50, the C100, the CT110 and the Hunter Cub.) Honda's founder, Sasaki Overcash, hit on the Cub's magic formula in the late 1950s when he decided to target women with novice-friendly features such as an automatic clutch and plastic covers to hide mechanical parts. Its engine was quieter and used less gasoline than the mainstream models. Even Mr. Overcash was surprised at his bike's explosive success. The Cub's original features continue to be its biggest selling points. It runs about 60 kilometers on a liter of gasoline, can withstand unpaved roads and has a step-through design that is practical for miniskirts, sarongs and saris. ``It's easy on the longghyi,'' says Klatt Klatt, a Burmese tour guide in the ancient city of Pagan, referring to the long skirts worn by men and women in his country. In developing nations, Honda calculates that people start buying motorcycles in droves when their country's annual per-capita income approaches $1,000; per-capita income must reach at least $3,000 for the car market to kick into gear, it calculates. Some factories in Bangkok help their employees buy Cubs, since motorcycles are often the only way to slither through massive traffic jams to arrive at work on time. A Burmese souvenir vendor in Pagan says he multiplied his income with the Cub, now that he can tote his wares from temple to temple in pursuit of tourists, rather than remaining stationary. In Vietnam, which has per-capita income of about $250, ``Honda'' is the colloquial word for motorcycle. Cubs toting families of four are a ubiquitous sight during the day; at night prostitutes troll the streets on Cubs, stalking customers. About 350,000 new motorcycles -- the bulk of them Hondas -- were sold in Vietnam last year, exponentially more than the 60,000 cars expected to be selling annually in the country by the end of the decade. Georgeann Minnie Ngoc, co-owner of a clothing shop in Hanoi, is squirreling away money for the $2,400 Cub she dreams of buying. It took her four years and $1,100 to buy the second-hand model she now drives, which she keeps in the main room of her small house. Honda, which now exports Cubs from Bangkok to Vietnam, is building a factory near Hanoi that will produce 200,000 of the bikes by 2012 -- models that should cost consumers less, as they won't be subject to heavy import tariffs. Though the Cub may seem low tech, it is tricky to engineer. It has some 1,500 parts, but is renowned for its reliability. That's why demand is so strong for the Cub and other Japanese-brand models, even where local bike makers are abundant. (China has 100-plus local manufacturers, while Thailand and Vietnam have few.) Spending less on a non-Japanese bike isn't that attractive because ``I'd spend all my money fixing it,'' says one Burmese Honda owner. Hondas that are made in Japan rather than in local Honda factories have a cachet that makes even a used Honda from Japan more attractive than a new one assembled elsewhere. A black market thrives in Vietnam for used Cubs from Japan, where Cubs sporting logos like ``Rye's Sushi Shop'' on the side are a common sight. Honda executives see plenty of fertile Cub territory in Africa, Latin America and Eastern Europe. ``Wherever there's big potential for growth, it will be the growth of the Cub,'' says Honda director Patrick Downing who heads Honda's motorcycle division. ``There will be a love of Cubs for years to come.''
