Stefan Pierer is reasonably confident that this will be another good year for KTM, with overall sales tipped to be closer to 2.7 lakh motorcycles, up from 2.4 lakh units in 2017. Yet, the CEO of the Austrian bike manufacturer, in which Bajaj Auto has a 48 per cent stake, is slightly concerned about the new global order of uncertainty. “Some emerging markets like Latin America are shaky and Argentina, in particular, is a worry. This is a good market for us,” says Pierer, in the course of an interview at EICMA, the motorcycle show in Milan, Italy.
Brexit, he continues, is another area of concern since there is still no agreement in place with the European Union. “Nobody knows what is in store and if it is a no-deal, it will be a headache for sure. Finally we will find a solution but the uncertainty is not good for any of us,” says a clearly irked Pierer. As he puts it, these are “crazy times” and his anxiety is borne by the fact that the UK is among the important markets for KTM. Should there be a ‘no-deal’ Brexit, bike makers will need to grapple with new challenges like homologation where more work will need to be farmed out to Europe.
Yet, these are early days yet since anything could happen between now and early 2019 when a decision will be reached on Brexit. “Finally, there will be a solution and I am confident talks will work out,” says a hopeful Pierer.
According to him, there are other issues that will need attention, especially regulation changes like Bharat Stage VI emission norms in India (Euro 5 in Europe). “It is going to be a challenge and hard for two-wheeler makers in India with very little time left,” he adds.
BS VI becomes a reality in April 2020, which means there are barely 16 months to go from now. The added challenge is that the Supreme Court has made it clear that the present BS IV range cannot be sold from that date which means stocks will need to be liquidated on time.
“Every manufacturer will have to increase prices which becomes a challenge in sensitive markets like India. After all, there are new technologies involved,” says Pierer while reiterating that he “is not worried but this is still a challenge”.
In Europe, “it is a little nicer” because there is a lean time of one year. By end-2020, every new model will have to be Euro 5-compliant but there will still be another 12 months to sell existing models. Yet, as Pierer says, all this eventually “benefits the customer, which is more important”.
With so much happening on the regulations front, in addition to issues like Brexit and trade wars, is this period the toughest ever for an automotive CEO? The KTM chief smiles and admits that these are indeed challenging times. “Beyond Euro 5, the next challenge for us is noise and we expect new (noise) regulations in 2024. This is a real issue in Europe and perhaps will follow in other parts of the world eventually,” cautions Pierer. This will involve reducing noise levels by two to three decibels, which becomes a technical challenge.
It is almost laughable to think that such a regulation will happen in noisy India but Pierer says there is no telling what the future has in store. Who would have thought, for instance, that India would embrace BS VI and end up being at par with Europe?
It is here that electric mobility could play a big role in the noise arena. “As the young generation grows up with e-bikes, noise does not become so important to them,” adds Pierer. This is already happening in parts of China and may well spill over into India eventually. “Noise will be the biggest challenge over the next five years,” he reiterates.
In this grim backdrop, the good news for KTM is that markets like India and ASEAN are doing well as also Europe where Italy, Spain and France are in the forefront. Pierer is also doubly pleased with the prospects of Husqvarna motorcycles being produced at Bajaj Auto’s Chakan plant next year.
Thus far, numbers in Europe have been limited, which means Husqvarna has not been able to access important regions in ASEAN and Latin America. “With Chakan, we will head out more aggressively worldwide,” says Pierer. KTM acquired this Swedish motorcycle brand from BMW five years ago and has been nurturing it carefully since then.
Producing Husqvarna in India is part of the strategy jointly planned between KTM and Bajaj Auto. The two have had a successful partnership for over a decade now, which began with Bajaj acquiring a 14 per cent stake in 2007. And even while this has grown to 48 per cent today, there is really no sense of one-upmanship. “It is an unusual partnership and nobody can emulate our alliance with Bajaj. The main thing is the personal relationship backed by 100 per cent trust to ensure a win-win situation,” explains Pierer. The business model has seen lower engine displacement (125-400cc) KTM bikes produced at Chakan which are sold both here and abroad. Husqvarna will follow the same route and the partners are confident that it will do well as well as its sibling.
“Last year, Chakan produced 100,000 units of KTM and hopefully in a couple of years this will be up to 200,000 units with Husqvarna,” says Pierer. The goal is to produce 400,000 units globally by 2022 where India and Austria will account for an equal share of motorcycles. Of these, KTMs will account for 300,000 units with the balance taken up by Husqvarna.
Typically, premium and sophisticated off-road motorcycles will be made in Austria while small engine displacements will happen in India.
However, there is a new chapter due to begin with higher displacement bikes (up to 800cc) now being proposed for India.
Pierer hopes this will happen over the next two years where this range will complement the 125-400cc KTM family. There are already a lot of common parts coming in from Indian suppliers for the higher range (for bikes like the KTM Duke 790) and a move to India is only logical, especially from the viewpoint of costing and access to other markets.
“Emerging markets are also turning premium and our mid-size motorcycles will head out there. What we are pretty pleased with in particular is the quality of the supplier base in India,” says Pierer, while driving home the point that the stage is set for the next phase of growth with these premium bikes.
It is also evident that age demographics are changing with youth power to the fore in emerging markets like India and the ASEAN region. This is why bike makers like KTM are leveraging the manufacturing competencies of their Indian ally. Additionally, the desire for bike ownership is far greater in India, thanks to growing urbanisation and pressure on public transport. It is also increasingly evident that urban youth are making a beeline for premium bikes. This is where a brand like Husqvarna, which is synonymous with “cool riding”, will complement KTM.
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.