KTM buys Husqvarna – Possible strategic reasons and implications

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An orange Husky soon?

It was confirmed over the weekend that KTM CEO Stefan Pierer bought Husqvarna from BMW Motorrad through his own investment vehicle Pierer Industrie AG for an undisclosed sum.

I wondered what the strategic reasons and implications could be for both KTM and Husqvarna and here are my initial thoughts.

Platforming

Between BMW and Husqvarna, there was no product overlap.  In fact, that was why BMW bought the niche Swedish  motorcycle manufacturer – ‘to improve its position in the field of light, sporty motorbikes’

However, a look at the types of bikes made by KTM and Husqvarna reveals almost identical offerings – off road, super-moto and nakeds.

If the reason is not to add a differentiated product to your model line up what could it be?

Platforming.

As a product development strategy, platforming has been has successfully employed by the automotive manufacturers for a long time.

It’s no secret that a Volks Wagen  Golf, Audi TT and Seat Leon all share the same platform.  They drive differently as a result of chassis and engine tuning. And of course styling and interior levels of finish differentiate them further. There are numerous advantages of platforming: re-use of engineering components, shorter product development cycles and reduced cost due to increased purchase volumes.

This could only improve both KTM and Husqvarna’s bottom lines.

In fact, Rajiv Bajaj, Managing Director of  Bajaj Auto alluded to this strategy when he said that  ‘at the back-end, both are essentially off-road motorcycles‘ and that he expects useful synergies in terms of product development and manufacturing.

Increasing market share

KTM is already the top motorbike producer by volume in Europe (having recently overtaken BMW Motorrad), selling 107,000 motorcycles in 2012 to the tune of 612 million euros.

On the other hand, Husqvarna generated only roughly 65 million euros selling roughly 10,000 bikes.  Even for a niche player, these are still pretty small numbers, resulting in a lot of upside for a sales increase.

With the purchase, KTM could extend it’s dominance even further by leveraging it’s distributor network to get more Husky’s in front of potential buyers in their showroom floors.

Back in Motorcross

Husqvarna is not an unknown in off-road racing, with Paulo Gonçalves riding his bike to tenth place overall in this year’s Dakar Rally.

However, the brand is woefully under-represented in Motocross.  They last competed in 1999, and a quick scan of the current AMA Supercross roster shows that all teams – except the KTM Factory team – are riding bikes from Honda, Suzuki, Kawasaki or Yamaha.

For 2014, don’t be surprised to if you see a Supercross team riding Husqvarna bikes and supported logistically by KTM in some way.

Pierer himself states that competing with the Japanese is likely.

‘It’s never 1 plus 1 equals 3, but it’s certainly 2.7, and there are still four Japanese brands from which there’s plenty to grab.’ he says.

Built in India for Asia

The final implication I foresee may be a small capacity Husqvarna model manufactured in India and marketed aggressively as a premium model in Asia where it is currently unheard of.

The Duke 200,  KTM’s Asia specific motorcycle,  is completely manufactured in Bajaj Auto’s state of the art facility at Chakan near Pune and exported world-wide.  However, domestically, the bike has also been a huge success in India.

An even smaller capacity, 125 cc version is also increasingly seen on roads in Malaysia, Indonesia and Singapore.

Seeing a success for the Duke, KTM and Bajaj could easily create a Husqvarna based on a KTM Duke platform and try the same tactic.

What do you think will happen as a result of the KTM buying Husqvarna ? I welcome all comments and feedback!

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