TVS Motor and BMW AG's motorcycle division announced a deal on Monday to jointly develop bikes that would give the Indian automaker access to BMW technology as it looks to stem its falling market share.
The long-awaited deal should help TVS revamp a dated product pipeline at the company, which has struggled to compete with a recent ramp-up in activity from Honda Motor and Yamaha Motor and could also help BMW gain a foothold in the world's second-largest bike market.
TVS Motor and BMW will develop a series of motorcycles for the 250-500 cc segment. This would mark the entry of India’s fourth-largest two-wheeler company into the above-250-cc two-wheeler space.
For the German premium two-wheeler maker, the agreement is part of its global realigning strategy, which includes a foray into the sub-500-cc segment.
The agreement involves both companies offering individual vehicle derivatives, which would be sold through their own distribution channels across the globe, said Venu Srinivasan, TVS Motor chairman and managing director.
As part of the agreement, TVS Motor would invest ^20 million in India, said Srinivasan. Initially, TVS would develop two products in India---one product for TVS and the other for BMW to sell in global markets. The first product is expected to be launched in 2015.
Srinivasan said while BMW brought technology and products to the venture, TVS would leverage its supply chain expertise and its ability to develop small products in bulk.
Yaresh Kothari, research analyst (automobile), Angel Broking, said in the long term, the tie-up would be positive for TVS Motor. About 95 per cent of India’s motorcylce market is accounted for by the 150-cc segment or segments with engine capacities lower than 150 cc. While the margins in the above-150-cc segment are high, volumes are low - in the near term, there would be no impact of the tie-up on TVS Motor’s ranking, Kothari said.
Stephan Schaller, president, BMW Motorrad, said globally, the company was realigning the two-wheeler business. The company planned to enter the sub-500-cc segment and foray into emerging markets with smaller capacity products and core offerings, he said., adding, “This is an important step towards more profitability and sustainability.”
The tie-up comes at a time when TVS has been losing market share to Honda Motor and Yamaha. For 2012-13, TVS reported a fall of six per cent in sales, compared with a four per cent rise recorded by the overall industry. Experts say it would be difficult for TVS to regain the market share lost to Honda. The Chennai-based company’s two-wheeler sales fell from 1,80,274 units in March 2012 to 1,62,507 units in March 2013.