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Bajaj to use KTM alliance to roll out bigger bikes

By Swaraj Baggonkar in Mumbai
May 26, 2009 09:29 IST
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A little more than two-and-half years after Bajaj Auto acquired its first stake in Austrian power bike maker KTM Power Sports AG, the Pune-based company is readying itself to derive full benefits from the alliance.

In addition to selling imported as well as locally assembled KTM branded bikes in India, Bajaj Auto intends to utilise the partnership for jointly manufacturing complex, high-end and powerful engines in the near future. This is expected to give a huge boost to both the companies' prospects in India.

Bajaj Auto, India's second-largest motorcycle producer, has been looking to establish itself as the leader in the premium bike segment through constant efforts in research and development, as well as through upgrade of the consumer to higher capacity bikes.

Rajiv Bajaj, managing director, Bajaj Auto, said: "We will pull out bigger bikes from the partnership. We will bring KTM models here so that our suppliers get properly acquainted with their bikes and engines. It is a process that will demand a lot of effort and time. It will take around five years (for us) to sufficiently integrate them."

The alliance will give Bajaj Auto a much needed access to KTM's intricate engine technology, while also being cost-effective through the use of its own R&D. Bajaj will spend Rs 140 crore (Rs 1.4 billion) this financial year towards R&D.

In addition, Bajaj will tap into KTM's extensive service and dealer network spread across premium markets like Europe, while KTM will use Bajaj's influence in China, one of the world's largest two-wheeler markets.

The Pune-headquartered company has so far spent about Rs 700 crore (Rs 7 billion) in KTM, mainly to buy shares in KTM through its Netherland-based subsidiary company, Bajaj Auto International Holding BV. From the 14.5 per cent acquisition bought in November 2007 for Rs 300 crore (Rs 3 billion), Bajaj had hiked its stake to 31.72 per cent till March this year in the Austrian company.

According to the disclosures made by the company at a recent press event, which involved the fourth quarterly results, the company has invested Rs 138 crore (Rs 1.38 billion) alone in KTM last year. Rajiv Bajaj is now also on the board of KTM.

The financial condition of KTM was hit hard by the ongoing downturn in the world market, as demand slowed down to alarmingly low levels. According to a financial report submitted by KTM to the Vienna Stock Exchange, it posted a net loss of euro 44.5 million in the first half of 2008-09, as compared to a net profit of euro 11 million in the same period of 2007-08.

Despite this, Bajaj stated, "The downturn has impacted everyone. But we are confident that KTM will bounce back. Newer ventures will positively affect the company."

Bajaj Auto is set to launch KTM's Duke 690 - a 654cc, single cylinder, 4-stroke engine motorcycle, as well as the 1190 RC8 superbike - a twin-cylinder, 1148cc motorcycle, next calendar year.

Also, by the middle of next year, the market will witness the launch of a motorcycle being jointly developed by both the companies at present. Thereafter, Bajaj will perhaps launch its first big engine bike in 2011 developed with the help of KTM.

Currently, Bajaj's Pulsar 220 is the only motorcycle from the company which has an engine capacity higher than 200cc.

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Swaraj Baggonkar in Mumbai
Source: source

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