KTM puts global building blocks in place

Stefan Pierer is a square shooter, which makes him an interviewer’s delight. The KTM pavilion at the Milan motorcycle show, EICMA, is packed with crowds keen on taking a closer look at the Duke 790, which is the clear showstopper.

As CEO of KTM, Pierer has every reason to be pleased. It was barely some weeks ago that the Austria-based motorcycle-maker signed a joint venture with its Chinese ally of many years, CFMoto. The alliance will see the commissioning of a new facility, which will produce bikes both for China and developed countries.

“This is part of a larger strategy given that we already have a good relationship with CFMoto,” says Pierer. The annual numbers will perhaps be 50,000 units over the next couple of years, which may not be much but still significant from the viewpoint of the Chinese customer’s preference for the KTM brand.

The Duke 790 unveiled at EICMA will definitely be part of the lineup and produced for other advanced markets too. “China could become an interesting developed market, which is heading towards an Europe-like model for 500cc-700cc bikes,” says Pierer.

Yet, it is India that is the bigger backbone of KTM’s operations where smaller displacement motorcycles in the 125cc-400cc range are produced at partner, Bajaj Auto’s plant in Chakan near Pune. The two companies are celebrating a decade of togetherness, a partnership that began in in 2007 when Bajaj first picked up a 14 per cent stake that has since grown to 48 per cent.

Chakan will soon be home to Husqvarna, the Swedish motorcycle brand that KTM acquired from BMW Motorrad four years ago. Pierer says production will begin at Chakan by end-2019 that means the Husqvarna brand will debut in the Indian market a year later. This “tough and ambitious programme” will kick off in Austria next month targeting developed markets in Europe, the US and Australia before making its way to Chakan.

“The Indian market has room for good looking bikes such as KTM and Husqvarna,” says Pierer. The retail plan will see the two premium brands housed in a single store on the lines of what is already prevalent in the US and Europe where the “dealer experience has been good”.

“Honestly, I did not expect Husqvarna to do so well since the 2013 buyout and we would like it to go as global as KTM from Chakan,” he adds. Local production will also keep costs at competitive levels, which has been achieved with the KTM range produced in India and exported to a range of countries.

For now, nearly 1,00,000 bikes are made in the Chakan facility of which half the output is shipped out. At present, the home turf in Austria accounts for 1,40,000 units, which means a total of 2,40,000 motorcycles are produced from the two locations. All premium race bikes and big displacement options are done in Austria while the smaller one happen at Chakan.

“In our five-year plan, we are aiming towards 4,00,000 units, which will roughly be split between 1,30,000 Husqvarna bikes and 2,70,000 KTMs,” says Pierer. Of these, at least 1,50,000 units will be generated from India with the remaining 2,50,000 coming from Austria by 2022.

It is quite likely that the Husqvarna range will also make its way to China at some point though these are early days yet. Some components for the Duke 790 are already being sourced from Indian suppliers even while its first stop will be China.

Likewise, Chakan gets components from China for the existing Duke family that are, in turn, distributed across the world. “China is becoming an important supplier base for us that means many things are possible,” says Pierer. Going forward, the KTM global strategy will revolve around Austria, India and China.

Europe accounts for 48 per cent of the company’s sales with North America taking up 25 per cent and the remaining 27 per cent spread across a range of markets. The KTM chief is bullish on the ASEAN region where the partnership with Bajaj will be a big help in markets such as Indonesia, Thailand, Vietnam and Cambodia. Additionally, free trade agreements between China and the Philippines, for instance, could throw up interesting opportunities.

However, not everything is hunky-dory on the emerging markets landscape with Latin America in particular, quite wobbly at this point in time. Brazil was a hot favourite not-so-long ago but is in bad shape now though the good news is coming from Argentina, which is far “more positive and stable”.

As for Africa, Bajaj already has a strong presence in Nigeria, which could perhaps be a useful reference point for KTM in the event some countries here are ready for its motorcycle range.

It is in this context that Pierer reiterates that trust and transparency are the key reasons why the partnership has been so successful.

For instance, when Bajaj inked its recent agreement with Triumph of the UK for midsize motorcycles, KTM “completely supported” the move. While there is no equity yet in the Triumph partnership, there is no telling what could emerge in the coming years as the bikes begin rolling out and the partners become more comfortable with each other. Perhaps this could lead to a deeper alliance between Bajaj, KTM and Triumph at a global level with Chakan as the manufacturing powerhouse.

Pierer refuses to be drawn into any such speculation but candidly admits that there is going to be some interesting consolidation happening in the motorcycle arena over the next decade with disruptive trends such as e-mobility and digitalisation. In Japan, former foes such as Yamaha and Honda are getting together for small scooters and e-mobility.

The KTM chief is only too aware of similar challenges in mobility happening in India too where there is joint work happening with Bajaj. Triumph will, in all likelihood, be part of this collaborative exercise that will see new trends panning out in the Indian landscape.

Interestingly, sales of electric bicycles (e-bikes) have been surging in Europe and it was barely a couple of months ago when KTM and the German-based Pexco announced that they would be making e-bikes under the Husqvarna brand. Pierer is getting his company ready for the new mobility arena. “Look what is happening in the car industry with pressure on ownership from the likes of Uber,” he says. “Sooner or later, this will happen in motorcycles too.”

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