While motorcycle manufacturers from around the world are struggling with sales of its larger performance bikes, Honda has found success with a production facility in Indonesia.

Earlier this month Astra Honda Motor (AHJ), Honda’s joint venture company in Indonesia responsible for motorcycle production and sales, held a ceremony to commemorate cumulative production of 25 million motorcycles.

Honda began motorcycle production in Indonesia in 1971 through a technical collaboration agreement. In December 2000, AHJ was established integrating the functions of parts manufacturing, engine and body assembly and wholesales activities. In 2005, AHJ began production at its third plant which has an annual production capacity of 1 million units.

The company now has an annual motorcycle production capacity of 3.1 million units, the second largest among all Honda subsidiaries and affiliates worldwide after only Hero Honda in India (with annual production capacity of 4.9 million units).
Honda has apparently found its success by taking advantage of certain countries looking to smaller size engine motorcycles as a mainstay of daily transportation.
 
The total motorcycle market in Indonesia, which is the third largest in the world after China and India, marked an all-time record of approximately 6.2 million units in 2008, a 33% increase from 2007.

But even a robust market has its challenges. Due to the global financial crisis, industry-wide sales declined during the first half of this year. However, the market started on a recovery trend due to various factors including a decline in policy interest rate, disinflation and stabilization of exchange rates.

In January 2009, Honda added an all-new Revo, which underwent a full model change, to its lineup of Cub-type models, which have been the key category in the market. In addition, to accommodate the recent increase in demand for automatic transmission (AT) models, Honda is enhancing its lineup of AT models by conducting minor model changes for both Vario and BeAT in July of this year and introducing Vario Techno, the first model in Indonesia which is equipped with CBS (combined brake system for front and rear wheels).

Encouraged by its success, Honda will reportedly spend more than 10 billion yen (109 million dollars) to raise capacity at its Indonesian factory by 20 percent to 3.6 million units. Indonesia is Honda's second-largest market for motorcycles, after India and the expansion of the factory concerned is expected to begin in 2010.