Volkswagen's Business Model for KTM?

The web-site IndianCarsBikes reported some speculations about the future of the KTM group. Ten days ago Stefan Pierer, the CEO of Austrian motorcycle maker KTM, bought the Husqvarna motorcycle brand from BMW Motorrad. The Husqvarna range of motorcycles will make their appearance in India come 2015. Like the KTM Duke 125/200/390, the Husqvarna range of motorcycles that’ll be launched in India will be built at Bajaj Auto’s Chakan factory. At the outset, the made-in-India Husqvarna motorcycles will feature engines with capacities between 125cc to 200cc, an engine platform that Husqvarna will share with the likes of Bajaj Auto and KTM.

Platform sharing seems to be the enduring theme around which Bajaj Auto, KTM and Husqvarna will work from now on. In Stefan Pierer’s own words, this motorcycle alliance has been liked to global auto behemoth Volkswagen. Volkswagen, which has a multitude of brands under its umbrella is betting big on the platform sharing approach, a theme that runs across the car maker’s various brands. So, motorcycles under the Bajaj, KTM and Husqvarna brands will share not just technology and parts, but will also use common sourcing and manufacturing strategies.

In fact, the ball has also begun rolling with the KTM Duke 200 and the Bajaj Pulsar 200 NS both sharing many engine parts. Also, both domestic and export versions of the Pulsar 200 NS and the Duke 200 are built at Bajaj Auto’s Chakan plant in India. In the next 12 months, a similar story will play out with the KTM Duke 390 and the Bajaj Pulsar 375, motorcycles that share plenty of parts. KTM and Husqvarna operate predominantly in developed motorcycle markets in Europe and other parts of the world. So, leveraging Bajaj Auto’s low cost-high quality manufacturing prowess will allow these global motorcycle brands to make impressive gains in terms of production costs and overall profitability, the very stuff that high end motorcycle makers across the world are currently struggling to optimize.

In India and markets abroad, the Bajaj, Husqvarna and KTM brands could co-exist with Bajaj being the low end player, while Husqvarna could occupy the space in the middle and KTM of course can position itself at the top of the price and value chain. With these developments, Bajaj Auto is emerging as a very strong challenger to the likes of Hero MotoCorp and Honda given the fact that the Indian motorcycle giant holds a 47% stake in KTM. Also, the platform sharing approach will help Bajaj Auto maintain its 20% EBITDA margins, a profitability figure that’s said to be one of the highest in the motorcycle industry. Bajaj Auto supremo Rajiv Bajaj has talked about platform sharing in the past and the latest comments from KTM CEO Stefan Pierer only reaffirms Bajaj Auto’s approach.