Article Tools

Indian Bajaj Auto Helps Plot KTM its Global Comeback

Published: July 25, 2014; 12:00 · (FriedlNews)

One in 5 of Austrian company's bikes are made in Pune, for a big cost advantage, enabling it to take market share from rivals.

Indian Bajaj Auto Helps Plot KTM its Global Comeback / Picture: © KTM

In late March this year, China saw the roll-out of two locally assembled motorcycles from the brand of Austrian off-road specialist KTM AG. The latter, Europe’s largest twowheeler manufacturer, joined hands with Chinese company CFMoto, building the two bike brands at a facility in Hangzhou, eastern China.

And, both motorcycles were designed, developed and manufactured at Pune by India’s second largest two-wheeler producer, Bajaj Auto, before shipping these to China for final assembly.

Also, the Duke 200 and Duke 390, sold in Europe and America alongside the Duke 125, are also made by Bajaj. In fact, Bajaj-made bikes accounted for a fifth of the total sales of KTM in 2013. Categorised as street bikes, they led the growth for KTM last year, when sales grew to an all-time high of 124,000, a growth of 16 per cent, beating BMW for a second year in Europe. Street bikes, majorly including those made by Bajaj, grew 40 per cent to 45,681 units, opening a new segment for KTM.

KTM is recognised for dirt bikes, high-end street bikes and superbikes A 14.5% stake buy by Bajaj in 2007 paved the way for a global strategic partnership

Traditionally, KTM has been recognised for its dirt bikes, highend street bikes and powerful super-bikes. But a 14.5 per cent stake buy by Bajaj in 2007 paved the way for a global strategic partnership covering joint product development, technology and distribution sharing between the partners. Bajaj Auto has since raised its stake to 48 per cent and secured two (occupied by Rajiv Bajaj and S Ravikumar) of the 11 seats on KTM’s supervisory board. More, KTM has outsourced all product development work up to 800cc to the Rajiv Bajaj-led company.

A new twin-cylinder engine platform and two new models (RC 200 and RC 390) to complement the existing range, to be launched later in the year, are some of the projects Bajaj Auto is working on with KTM.

A total of 11,000 KTM bikes were sold in India in 2013-14 and another 24,000 were exported. Bajaj aims to raise the annual export figure to 70,000 annually. Further, it is making room for producing the Husqvarna motorcycle, a brand KTM chief Stefan Pierer acquired recently from BMW. The first ones are expected to roll out in 2015-16 from Bajaj’s Chakan factory, near Pune. Bajaj will develop vehicle platforms and engines which will be shared between itself, KTM and Husqvarna in future.

Riding on new-found successes, the Austrian motorcycle maker posted a net profit of €36.5 million (Rs 310 crore) in 2013, a far cry when compared with a €81.4 mn (Rs 500 crore) net loss in 2008-09. From annual sales of around 90,000 units before the stake sale to Bajaj, these grew to 123,859 units in 2013. Rajiv Bajaja, managing director of Bajaj Auto, told Business Standard, “KTM has gained market share without exception in all its existing markets, including Europe and Japan, while being able to finally enter markets such as China and Thailand, for which it didn’t have viable products so far.” Bajaj’s frugal manufacturing base is allowing KTM to enjoy greater pricing advantage, as products are made for 30 per cent less than those produced in Europe.

Development costs on these highperformance machines are much lower in India than in the research center of KTM in Austria.

After dethroning BMW from the top position, KTM has set its sight on Japan’s bike makers. It has an ambitious plan to displace Kawasaki and Suzuki by 2020 - going past Suzuki in two years and beating Kawasaki in five years - in the premium notorcycles segment. KTM is already ahead of Suzuki on sales in Japan and claims it has reached halfway on beating Kawasaki. Bajaj’s Pune plant will, thus, become the production hub for all KTM bikes with engines up to 800cc.

On being asked if Bajaj Auto would assume a bigger role in defining the way forward for KTM, Rajiv Bajaj said, “Qualitatively, it’s as originally envisaged whereas quantitatively, with each passing year, our joint products represent a greater share of KTM’s global sales.”

Fast News Search
Read More