European two-wheeler brands are keen on strengthening presence in the Asia-Pacific region to offset the setbacks in Europe.

When Stefan Pierer told me during a recent visit to India that the motorcycle market in Europe had crashed by nearly 50 per cent over the last few years, my jaw literally dropped.

“Well, everyone is so focused on cars that they forget that bikes have been having a rough time too,” the CEO of Austria-based KTM quipped.

So what does Pierer do to weather the crisis which could only get worse this year? For a start, he has an Indian partner in the form of Bajaj Auto which owns a substantial stake in his company. The plant near Pune is already producing KTM-branded bikes for Europe and is now getting ready for the next big thing with the Duke 390 that will head out to the US too.

Lighter and affordable

“One major spin-off that emerged from the European crisis is smaller displacement bikes which are lighter and affordable. The new Duke 390 is 138 kg with 44 hp and is still a real KTM. Why do I need a heavy bike when this is ready? It is a top product for India and the West and perhaps a premium product for emerging markets,” an excited Pierer says. In fact, the ASEAN region and markets such as Indonesia, Malaysia, Thailand and the Philippines are critical to KTM, going forward, especially when Europe is showing no immediate signs of revival.

Pierer believes that motorcycles will fall by another ten per cent this year, thanks largely to Italy, which plummeted nearly 30 per cent in 2012. Germany and Scandinavia are still holding out but globalisation is eventually the only way out for survival. The KTM chief is banking on Bajaj Auto to play the big role here.

“The Indian plant will be a backbone for small, and even mid, displacements in half a decade from now. In time to come, it will be at par with our European production of 1.00,000 bikes annually,” he says. This will mark a five-fold jump from the present output of 20,000 units but Pierer is confident that the Bajaj facility can comfortably meet the challenge. He is visibly impressed with the dual bonus of high quality and competitive costs that India has to offer. “This combination is awesome and the key to our success in the future. European engineers are always looking for the best solutions whereas, in India, it is all about technology and low-cost thinking,” he says.

Big names rev up

While this is the KTM script with India as the pivot, a host of big global names in the two-wheeler space are doing something similar. BMW Motorrad, for one, is in talks with TVS Motor to explore working jointly in areas such as technology and sourcing.

While there are no other details yet, it would be fair to surmise that TVS will play a big role at the back-end where its manufacturing processes are right on top. To that extent, there could be a KTM-like business model where bikes are made locally for India and the rest of the world.

“TVS is synonymous with quality which explains why a name like BMW is keen on an alliance,” an industry veteran says.

On the subject of European two-wheeler brands, Piaggio is also keen on strengthening its presence in the Asia-Pacific region to offset the setbacks in Europe.

The Italian scooter maker has just launched its premium Vespa in India and is expected to further localise content at its Baramati plant. It is still not clear if this will result in the facility playing a bigger global role considering that Piaggio has already zeroed in on Vietnam as its hub for ASEAN.

The company has targeted eight countries as its growth levers over the next three years. Vietnam, Thailand, Malaysia, Korea, Indonesia and Taiwan are already part of this plan while Cambodia and the Philippines will join the parade over the next 12-15 months.

Piaggio may well use the India plant for shipping out critical components to these countries but this will depend on FTAs (free trade agreements) taking off with ASEAN.

Best in quality, costs

Yamaha could have missed the bus in India, which is ironical considering that it got off to a resounding start over two decades ago.

While it has clearly prioritised Indonesia, Vietnam and Thailand as its bigger markets, the company will still use India as one of its major regional procurement bases to source parts for its global two-wheeler operations.

This clearly shows that Yamaha appreciates what the country has to offer in terms of its robust ancillary supplier base.

Going forward, headquarters in Japan will focus on technologies while the ASEAN regions will double up for product development. Yamaha is also exploring the option of using India’s low-cost skills to manufacture bikes for markets such as Africa.

Amidst these names is Honda, the monarch of the two-wheeler industry which would ideally like India to emerge as its top market over the next three years, ahead of Indonesia and Vietnam.

It is not too hard to figure out why. By the end of the day, this is the second largest two-wheeler market in the world, only behind China, and offers the best in quality and costs.

Honda has targeted production of ten million bikes and scooters by 2020 which will involve setting up at least six plants in India.

Three are already in place in the North and South and indications are that the East and West will also be part of the roadmap eventually.

Honda has made no secret of its ambition to rule the roost in India, especially after parting ways with former ally, Hero, which walked away with two top selling brands in the form of the Splendor and Passion.

The Japanese automaker is, therefore, stepping on the gas in a big way while being completely aware that the landscape has changed completely from the early 1980s when it had first set foot here.

Today, it has strong local competition and is up against a youthful buyer base which is far more savvy and discerning than its predecessors in its choice of bikes. Honda will sure have its task cut out.

(This article was published on February 7, 2013)
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