TVS Motor Co. Ltd on Monday said it is investing €20 million in tying up with German auto maker BMW AG’s motorcycle division, BMW Motorrad, to source technological know-how for developing high-end motorcycles.
The move could be seen as an effort by TVS to match the technological capabilities of peers in the Indian market. Other Indian two-wheeler companies such as Hero MotoCorp Ltd and Bajaj Auto Ltd have partnered with foreign technology providers such as Erik Buell Racing of the US and KTM AG of Austria, respectively.
According to the long-term agreement, TVS will invest in making vehicles below 500 cc and the development costs will be borne by BMW.
“We have been working on this for sometime and we have signed a long-term agreement, where we will marry our ability to engineer products in mass, and use the high-quality engineering and technology strength of BMW,” said Venu Srinivasan, chairman of TVS Motor, whose market share slid to 13% in FY 12, from 18% in FY 07.
The vehicles will be manufactured in two different styles for TVS and BMW each and will be sold through their individual dealerships and will also be exported. The products developed through this tie-up are expected to be launched in 2015.
Experts say this deal will not have an immediate impact on TVS Motor’s declining market share as the market for high-end bikes in India hasn’t yet matured.
“Any technological tie-up will be a positive from a long-term perspective. In case of this deal, there is not much that would result as a big game changer for TVS Motors as the domestic two-wheeler industry itself is going through a tough time,” a Mumbai-based auto analyst said, requesting anonymity.
TVS’s performance lagged that of the Indian two-wheeler industry, which grew by 2-3% in the year ended March. While Hero MotoCorp and Bajaj saw sales drop to about 2-3%, TVS sales fell 7%. Honda Motorcycle and Scooter India’s sales bucked the trend and grew by 30%, according to Yaresh Kothari, analyst, Angel Broking.
While the deal will be a positive for TVS from a strategic point of view as it could open the doors for the company in international markets, it is unlikely to result in any significant improvement in earnings or volume for TVS in the domestic market, said the Mumbai-based analyst.
Srinivasan declined to comment on whether the technological know-how will extend to products below 250cc as well. He also said there has been no equity sale in this deal.
TVS Motor entered into a technical and equity collaboration with Japan’s Suzuki Motor Corp. in 1982 to form a joint venture, which introduced several models including Suzuki Samurai, Suzuki Shogun and Suzuki Fiero.
TVS and Suzuki parted ways in 2001, and since then the company has been a solo rider battling for a greater share in the growing two-wheeler market.
For BMW, this deal should help gain a foothold in the Indian motorcycle market, Kothari said.
Stephan Schaller, president of BMW Motorrad, said BMW was in the process of realigning its motorcycle business to improve profitability and sales. “It is a logical step to develop motorcycles below 500 cc for emerging markets in Asia and South America to improve profitability.”
BMW Motorrad, known for its 600cc to 1600cc category of bikes like Enduro, Sport and Roadster, sold 117,000 motorcycles worldwide in 2012.
The move could be seen as an effort by TVS to match the technological capabilities of peers in the Indian market. Other Indian two-wheeler companies such as Hero MotoCorp Ltd and Bajaj Auto Ltd have partnered with foreign technology providers such as Erik Buell Racing of the US and KTM AG of Austria, respectively.
According to the long-term agreement, TVS will invest in making vehicles below 500 cc and the development costs will be borne by BMW.
“We have been working on this for sometime and we have signed a long-term agreement, where we will marry our ability to engineer products in mass, and use the high-quality engineering and technology strength of BMW,” said Venu Srinivasan, chairman of TVS Motor, whose market share slid to 13% in FY 12, from 18% in FY 07.
The vehicles will be manufactured in two different styles for TVS and BMW each and will be sold through their individual dealerships and will also be exported. The products developed through this tie-up are expected to be launched in 2015.
Experts say this deal will not have an immediate impact on TVS Motor’s declining market share as the market for high-end bikes in India hasn’t yet matured.
“Any technological tie-up will be a positive from a long-term perspective. In case of this deal, there is not much that would result as a big game changer for TVS Motors as the domestic two-wheeler industry itself is going through a tough time,” a Mumbai-based auto analyst said, requesting anonymity.
TVS’s performance lagged that of the Indian two-wheeler industry, which grew by 2-3% in the year ended March. While Hero MotoCorp and Bajaj saw sales drop to about 2-3%, TVS sales fell 7%. Honda Motorcycle and Scooter India’s sales bucked the trend and grew by 30%, according to Yaresh Kothari, analyst, Angel Broking.
While the deal will be a positive for TVS from a strategic point of view as it could open the doors for the company in international markets, it is unlikely to result in any significant improvement in earnings or volume for TVS in the domestic market, said the Mumbai-based analyst.
Srinivasan declined to comment on whether the technological know-how will extend to products below 250cc as well. He also said there has been no equity sale in this deal.
TVS Motor entered into a technical and equity collaboration with Japan’s Suzuki Motor Corp. in 1982 to form a joint venture, which introduced several models including Suzuki Samurai, Suzuki Shogun and Suzuki Fiero.
TVS and Suzuki parted ways in 2001, and since then the company has been a solo rider battling for a greater share in the growing two-wheeler market.
For BMW, this deal should help gain a foothold in the Indian motorcycle market, Kothari said.
Stephan Schaller, president of BMW Motorrad, said BMW was in the process of realigning its motorcycle business to improve profitability and sales. “It is a logical step to develop motorcycles below 500 cc for emerging markets in Asia and South America to improve profitability.”
BMW Motorrad, known for its 600cc to 1600cc category of bikes like Enduro, Sport and Roadster, sold 117,000 motorcycles worldwide in 2012.
