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KTM set to kick off new chapter in India with 790 Duke

Murali Gopalan | Updated on September 20, 2019 Published on September 20, 2019

The Austrian bike-maker will leverage its China JV for global distribution

As KTM prepares to launch its 790 Duke on Monday, it will mark yet another key chapter in its alliance with Bajaj Auto.

The bike was the showstopper at the 2017 EICMA motorcycle show in Milan and it was only a few weeks prior to this that KTM had signed a joint venture agreement with CFMoto, its Chinese ally of many years.

It was quite evident that the 790 Duke would be part of the China production plan and as Stefan Pierer, CEO of KTM, told this writer, “China could become an interesting developed market, which is heading towards an Europe-like model for 500 cc-700 cc bikes,” he had said.

Some components for the 790 Duke are already being sourced from Indian suppliers even while its first stop would be China. “China is becoming an important supplier base for us that means many things are possible,” Pierer had said. The KTM global strategy would, therefore, revolve around Austria, India and China.

Supply from India

Fast forward to EICMA 2018 when Pierer, in another interview, told this writer that the company was contemplating the launch of higher displacement bikes (up to 800cc) for India. He had said then that there were already a lot of common parts coming in from Indian suppliers for the higher range.

To that extent, the move to India was 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,” Pierer had said while reiterating that the stage was set for the next phase of growth with these premium bikes.

For now, the 790 Duke will in all likelihood be a fully built-up imported bike and not part of the production line at Bajaj Auto’s Chakan plant near Pune. However, depending on market response, it could end up being manufactured here even while KTM’s facility in China will be the key hub for global distribution.

This has been articulated by the Austrian bike-maker in its investor presentation some weeks ago where the role of the new Chinese joint venture with CFMoto has been spelt out in greater detail. As KTM Industries has said in its presentation, CFMoto is now the distributor for its motorcycles in China. Once the joint venture kicks off production, the 790 Duke will be distributed worldwide from China.

KTM has also said in its presentation that the JV will focus on the industrialisation of components from China and the ASEAN region. It will also look at assembly of ‘mid-class street motorcycles’ with engine capacities of 500-1000 cc. As a result, continues KTM, production costs of these motorcycles will be reduced. Additionally, import duties ‘into the Chinese market will be eliminated’ and production capacities in the Mattighofen plant back home in Austria ‘will be relieved’.

At present, CFMoto has a production capacity of 50,000 motorcycles and the space for a ‘possible expansion to around 100,000 motorcycles is available’. Eventually, motorcycles produced by the JV will be distributed worldwide.

India plan

It remains to be seen if India will be part of this plan to source the 790 Duke from China. From the costing point of view, this will not make sense considering that the Chakan plant is already home to the KTM range (125 cc-400 cc) and will soon be joined by the Husqvarna brand too.

Chakan has emerged a strong manufacturing powerhouse for KTM and bikes made here are shipped out to many parts of the world. The costing efficiencies achieved here through strong localisation will be good enough to support production of the 790 Duke too should the need arise. Eventually, it will have to make business sense from the viewpoint of balancing domestic demand and economies of scale.

The KTM Industries presentation has also made clear that India is seen as the most ‘important future market’. By 2022, the company has targeted worldwide production of 400,000 units (2.6 lakh units in 2018) of which India’s share will be 1.28 lakh units, just a whisker behind Europe with 1.3 lakh units.

It is quite obvious that emerging markets will be the bigger growth engines of the future and explains why the partnership with Bajaj is key to the KTM growth script. The two will now work jointly in the electric space that will see the development of a 48-volt two-wheeler platform.

These are early days yet but with the Indian government keen on giving electric mobility a big push forward, there could be some interesting things in store from the Bajaj-KTM alliance. The two have had a successful bonding for 12 years 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 still no sense of one-upmanship.

Bajaj partnership

“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,” Pierer had said during the 2018 interview.

The KTM chief had also reiterated in an earlier interaction that trust and transparency were the key reasons the partnership has been so successful. For instance, when Bajaj inked its agreement with Triumph of the UK for mid-size motorcycles, KTM “completely supported” the move.

The coming years will have some interesting dynamics at play for the Indian two-wheeler landscape. From the viewpoint of Bajaj, it will have its hands full with the Triumph deal even while strengthening its alliance with KTM. There will clearly be an aggressive overseas play for mid-size bikes and this is where the Chakan plant will have a huge role to play.

After all, it will be home to KTM, Husqvarna and the Triumph range, which means that its capacity could be expanded even further in the following decade. It will also be interesting to see how the partnership between Bajaj and Triumph develops in tandem with KTM’s own growth plans.

Published on September 20, 2019

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