Need To Restore KTM Brand & Bring Cost Competitiveness: Rajiv Bajaj, MD, Bajaj Auto | CNBC TV18

Well, fundamentally, Parikit, while it may appear that a motorcycle is a motorcycle is a motorcycle, there are two worlds of motorcycles out there. There is one world of the volume brands, you know, such as Honda, Yamaha, Enfield, TVS, Bajaj, etc. And this is roughly an industry size of 50 million vehicles. Of course, mopeds, scooters, step-throughs, motorcycles all put together. This is, let's say, the mass or the volume space. And then there is the more premium or lifestyle space. That's more dominated, I would say, by western brands such as, let's say, KTM, Triumph, Ducati, BMW, Harley — you know, these are the better-known ones. And this is an annual industry size of a little under 1 million a year. So it's 50 million here, it's 1 million there. And quite frankly, these are very different businesses, different business models obviously because the scale is very different. You know, the whole — the levers of brand, technology, quality, cost, distribution work very differently in these two spaces. And we have always been of the belief, the last 20 years, that while the Bajaj brand is very appropriate, very competitive in the first world of 50 million vehicles where we have a lot of headroom to grow because we are under 5 million in an industry size of 50 million worldwide. But however, I think we have the humility to understand that our brand is not going to carry over effectively in terms of pricing power, let's say, in the second world of the premium or the lifestyle products. And that's where the association with KTM and Triumph is really invaluable for us. And that's fundamentally the reason why it was necessary for Bajaj to step in when it became necessary because of this crisis that came upon KTM, to, you know, keep this brand going, to keep this operation going, because even for us from a business point of view, it's a significant revenue and a significant contribution to our bottom line.

Quite frankly, scale is not the most important thing for KTM. I think, you know, in this world of motorcycles, as I mentioned, the industry size is about 800,000 a year. Market shares don't move by much. The qualitative metrics are more important here. And I think, you know, we've obviously been grappling with this issue for the last six months. We've had some very good meetings with our counterparts at KTM. Almost the entire senior management team was here last week for two days. And I can tell you that the roadmap ahead rests fundamentally on these two thoughts. First, we have to restore the brand. You know, as unfortunately happens sometimes with success, you tend to diffuse the brand by, you know, extending it into too many categories, too many segments, even beyond the core segment. And the second thing that then leads to — the brand diffusion leads to — is this proliferation of SKUs that makes the business very complex right from R&D to the dealer workshop. You know, so we have to first, in my opinion, we have to restore the brand to the core. You know, and from that will follow a great simplification of the operations which will have a very salutary effect on the company.

The second thing we have to do is to reset the cost. You know, to put it very simply and bluntly, European manufacturing is dead. I think the auto industry, including the car industry, understands that now. They would have political, social, and other compulsions why they cannot move everything out of Europe to, you know, somewhere in Asia to produce more competitively. But let me give you an example of Triumph. Mr. Bloor moved 100% of Triumph production to Thailand over 15 years ago. You know, every single Triumph motorcycle that is made today is made either in Thailand and, of course, more recently in India. If Triumph can do this 15 years back, in principle, why not KTM? And I have never — or we have never shared this specifically before — but let me tell you that while KTM struggles in Europe, the KTMs that we make and export out of India to different parts of the world bring us an EBITDA margin of over 30%. You know, and the main reason for that is the great cost competitiveness that India and the Indian supply chain and our excellent suppliers offer. So we have to reset the cost of KTM. We have to restore the brand, and if we are able to do this effectively, then I think KTM has a very bright future.

KTM exports — well, before this disruption, you would know that our exports of KTM motorcycles worldwide were of the order of about 15 to 20,000 a month. As I said, very profitable. If I'm not wrong, in the January-February-March quarter, this fell to zero. So it reduced progressively as they found themselves in trouble from, you know, the middle of last year. And in the first quarter of this calendar year, I think we exported nothing. In Q1, if I'm not wrong, we are back to 14,000 or so. So I would say the lower end of the normal. And I'm quite hopeful that as we move forward for two reasons, we should do even better. One, because KTM is, you know, step by step every week getting stronger, which means dealers, distributors, etc. — you know, things are normalizing. And secondly, perhaps you are aware that in terms of the new Duke, the new Adventure, the new Enduro, and Supermoto, we just started up with several new products. So I think that will bring us additional business as well. So I think the short story is that KTM exports may well hit a new high, of course, subject to the Trump tariffs.