BMW could be mulling smaller capacity bikes for emerging markets, say analysts

BMW Motorrad has said that it is talking to domestic two and three-wheeler firm TVS Motors for a tie-up which covers the supply and production of components.

This follows Chennai-based TVS’ filing to the stock exchanges on Monday that it is in discussions with the German company for a technology tie-up. However, Mr Venu Srinivasan, TVS’ Chairman, has said that an equity sale is ruled out. Business Line had reported this on Sunday.

On this news, TVS stocks on the BSE were up 8.6 per cent during intra-day trade on Monday. On Tuesday, the shares again rose 1.01 per cent to Rs 39.90.

“We are looking into India as well as into other Asian countries. The target is to find new partners for parts supply or production of components. With this regard, we had also some contacts with TVS,” a BMW Motorrad spokesperson said in a reply to e-mailed queries.

The BMW official added that there is currently no plan to bring sister brand, Husqvarna, to India.

BMW Motorrad President, Mr Hendrik von Kuenheim, had also paid TVS’s plant a visit recently and had praised it operations in the global media.

Smaller bikes

Industry insiders said that the move to tie-up with an Indian auto company for parts sourcing is likely a part of BMW Motorrad’s broader strategy to unveil smaller displacement engines (125cc, 250cc). At present, its global range starts from 650cc, while in India it does not sell bikes below 800cc.

With India’s two-wheeler market the second-biggest in the world, a tie-up with experienced local firms would help BMW target a captive market and also reduce its development and manufacturing costs.

“Smaller engines will widen its portfolio to a more mass market within the premium end. With an eye on volumes, such vehicles can be leveraged for growth in the emerging markets such as India and other parts of South-East Asia - since the developed markets are now saturated,” an industry analyst said.

UK-based Triumph, which has a facility in Thailand and is setting up its third global plant in Karnataka, is rumoured to have a similar plan - it is reportedly developing a 125cc bike for emerging markets. Meanwhile, US’ Harley-Davidson is also working on an India-specific bike. BMW Motorrad, which entered India in December 2010, currently operates through an import model and does not assemble locally. This makes its range expensive as they attract high import duties at 60 per cent.

“The motorcycle market for premium motorcycles in India is still quite small but is beginning to develop. Against this background, it’s been a strategic decision to enter the market now to be prepared for the expected future growth,” the BMW official said.

The German bike brand has three local dealers – in Delhi, Mumbai and Bangalore and sold 55 units in 2011. In the first half of 2012, it has already sold 45 units.

(This article was published on July 10, 2012)
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