Our in-depth one-on-one interview with KTM president Stefan Pierer continues. In part two of our two-part chat with Pierer, we discuss E-bikes, a Husqvarna twins flat track team, cruisers, and the possibility of building a manufacturing plant on U.S. soil. Could that actually happen?
Click here if you missed part one of our interview with Pierer.
Photography by Emanuel Tschann
How many KTMs have been built in India so far?
Since we began in 2011, we so far built 515,000 bikes up to the end of 2018. Last year they built 100,000 units, and a bit more than half of that stays in India and Indonesia, with the rest distributed worldwide, from Austria to the USA, from Australia to wherever. It’s a very successful cooperation, and Rajiv [Bajaj] and I each found the right partner! In 2006 when we met up, they were looking for a technology partner, and we were looking for a low cost production partner in the biggest market of the world, which is India. We got introduced by an Austrian guy, a banker who worked with us on the first IPO in ’96. We met for the first time in ‘07 at the Geneva Car Show where we presented our X-Bow for the first time, and the chemistry worked immediately, so it all came from there.
So far though, Bajaj has only made single-cylinder KTM products. Is there a capacity ceiling for such bikes, and will you only ever have singles made in India, or could there be twins, too?
No, because we’re jointly working on a 500cc Twin, which will be 100 percent developed at the Bajaj R&D center in Pune, but which is supported by our R& D guys. It’s a parallel twin similar to the format we have on the 790, only 500cc because that’s the future premium class in emerging markets, as well as an A2 license bike. I believe we both have really state of the art R&D operations in each company—we have 700 people on our side, and their counterpart in Pune has 1,000 people. The two leading guys, Phillipp Habsburg and Joe Joseph know each other very well and are good friends, so we’re working very closely with Bajaj, which I believe will allow us to take a leading position in the electro-mobility sector, as well.
Will there also be Husqvarna versions of the 500 Twin?
Every engine platform can be used by all brands in the family.
Bajaj has formed a joint venture with Triumph, which seems to be even closer than was originally envisaged. If Bajaj assumed control of Triumph independently of KTM, what would be your reaction?
We know each other quite well, so I’m aware of what’s going on, but everybody has a lot of work to do to make this happen. But I think we have a clear plan, if it’s working out otherwise.
So could this involve KTM, with Bajaj as a substantial, just minority shareholder in KTM, acquiring the direction of Triumph?
I don’t know. But if Triumph wishes to have a certain relationship, for sure I have ideas about this. But thanks to Brexit it’s easier for Indians to talk to the British compared to someone from central Europe—so it’s more difficult to talk with John Bloor from Austria than from India. You need a specific approach! That is what I’ve learned in India, that it comes as it comes, it is as it is, and you have to accept it. So if it comes up, we are prepared.
So whatever Bajaj and Triumph decide to do, you’ll adapt accordingly.
We talk to each other.
Looking at further aspects of your collaboration with Bajaj, what’s the position of KTM’s electric motorcycle program? It seems like it’s kind of stalled—you started out with a range of E-motorcycles, but it hasn’t gone any further, and you haven’t produced the E-scooter that we were expecting. You do have electric bicycles, but what’s happening with Bajaj, which is under significant pressure to develop a range of E-bike because of the very fierce emissions regulations introduced by the Modi government?
I think perhaps that’s the outside view for reasons I understand, but internally we are at the leading edge of electro-mobility. At KTM we slowed down for two reasons. First of all, integrating Husqvarna, because to assimilate such a big brand took time, so that instead of 6,000 bikes a year we’re now doing 50,000, and doing so profitably. The second is that we wanted a good margin of profit in delivering E-bikes to the market, compared to at the beginning of electro-mobility, when especially high-voltage concepts were not profitable. If you look back at the past 10 years of the dawn of electro-mobility, the Vectrix which came first was also the first bankruptcy—everybody has just been burning money. What we learned out of our experience is to focus on low voltage models with 48-volt motors, which don’t impose big safety requirements in terms of logistics and the dealer network, which means you can cover a performance range from the E-bicycle up to the A1 motorcycle class—it’s around 10kW, and that you can cover with 48-volt motors. So in the next two years you’ll see a huge variety of E-products from all our brands—KTM, Husqvarna, GasGas, Bajaj, whatever. That’s because together with Bajaj we’ve developed a range of engine platforms between 3kW and 10kW, which are air-cooled or water cooled depending on the concept, and these will now be industrialized in India, like our single-cylinder four-stroke engine platforms, and they’ll be the powertrain for a huge variety of products.
Motorcycles and scooters?
Both. See, in the beginning everybody thought it’s very easy to have an electric product, just take the motor from a generator or whatever. We developed a kids’ bike, which I can tell you was a difficult task partnered with a highly skilled Swiss company, but despite that, the motor was not what I expected. So that led us to the decision to do our own together with Bajaj, industrializing it in India, so we can work out the production costs, and then we are ahead of China. Because in India, there’s a huge pressure on electro-mobility since Modi told everyone we have to go electric in 2020—it’s crazy, but the pressure is really there.
This obviously then pre-supposes, will you ship the Bajaj-produced electric product to China for CFMoto to assemble and sell?
That won’t happen in the next couple of years, because we are focusing on the developing E-markets. China is a huge electric vehicle market, but in the beginning for sure we want to serve India, and I think the developed markets are ready to create serious margins so that you can finally earn money from E-bikes.
Will you be going to the USA with this, which of course is a huge developing E-market?
We already stepped in last year with electric bicycles under the Husqvarna and Raymon brands as part of a joint venture, and this year we are already selling 65,000 units in Europe.
Where are these assembled?
Partly in Bulgaria, partly in the Far East, but the distribution center and main hub is in Germany. It’s a joint venture with a local family with longstanding experience in the bicycle business, who started two years ago, and asked us to do something together.
How interesting. This is not widely known!
I know! It’s because our holding company is publicly listed in Switzerland, so I have to do any risky things very carefully, and quietly. So usually you start outside of the balance sheet to see how it’s going, and then as soon you’re sure that it works very nicely, then you can integrate it. We use the former KTM Industries company, which has been renamed Pierer Mobility AG, because we have KTM, but we also have Husqvarna motorcycles, Husqvarna bicycles, Raymon, WP, and now GasGas, so it’s more helpful to keep the KTM brand away from any sharp positions.
You’ve announced that you’ll be entering a KTM factory race team in a new form of racing for you, American Flat Track. Please tell me about this.
Yes, I think AFT is getting very popular in the States, and indeed worldwide through their live feed. It’s a very affordable category to access, and I see it in the future as a good platform for Husqvarna, especially in the big Twin-cylinder class.
So you’re going in to AFT with a Husqvarna team?
Yes, although not next year, but from 2021 onwards. We’ll do the small singles class with KTM where we already won the championship, but with a twin, it’ll be Husqvarna because it has such a huge presence in the USA, and we are in let’s say the learning curve of becoming a street brand. I think flat track is a perfect area where we can establish Husqvarna as something other than an off-road brand.
The natural spinoff from that will be to make a customer bike, as Indian have done with their FTR750 to the point where their customers can occasionally beat the factory team. Will you do the same?
Yes, for sure we will do the same with Husqvarna.
Will you make a Husqvarna street tracker based on the AFT race bike, as Indian has done so successfully with the FTR1200?
It’s not out of reach, but step by step because even we have some limits in resources, and we are already basically everywhere! But yes, it’s in our medium term plans.
Will you use a 790 or the 890 engine for your AFT bike?
You have to ask the race guys! I honestly don’t know.
We’ve talked about your platform strategy, but KTM has not yet made a cruiser. Are you interested in purchasing someone like, say, Moto Guzzi so as to enter this very different brand segment?
More than 20 years ago I was close to taking over Moto Guzzi—back in ’98, in fact. Because for me Moto Guzzi is the brand, which can show the European approach to the Cruiser type of motorcycle, plus it has a much richer technical history than people think! They went racing with some fantastic bikes like the V8 and the lightweight singles—and they won. Moto Guzzi for sure would be an interesting acquisition for me, but it’s also part of the Piaggio group, so I wouldn’t expect the Colanninno family to bring it to the market. But Moto Guzzi is a still a very good European brand.
How about investing in another cruiser company, named Harley-Davidson? Are you and Rajiv Bajaj interested in acquiring the Motor Company?
That’s size-wise too big, and secondly, for me that’s not really motorcycle riding. It’s more like driving around in a convertible with the top down, but riding on two wheels, that’s my definition. We’re used to a more sporty, upright style, to have the center of gravity and—well, you know how it works, you’re a racer, so that’s different. Although in ’98, I already had a very good discussion with [Harley CEO] Jeff Bluestein, because at that time we were still just off-road, and we were looking for a strong street brand to cooperate with for distribution and development. We had a good discussion, but finally he put a lot of money on the table and said, “We will buy you.” But I was very young, and that was not my vision of my career in the motorcycle industry, so I stopped the discussion! But we had a very good relationship—he was a cool guy, and we stayed friends. But really and truly Harley today is not for us.
What’s KTM’s long-term projection for your two-stroke models, which I believe still sell steadily?
Yes, it’s on a very stable level, especially since the Japanese decided to come back, which helped the market! And having Husqvarna as the second brand is also a help. For sure it will stay at a certain level, and off-road will stay alive indefinitely if it’s heading towards closed-course usage, as it appears it will. On our two-strokes, we have that specific fuel injection which works for Euro 4, but for Euro 5, I think it’s going to be difficult, so two-strokes are heading towards closed-course use only, not on the public highway.
It seems Husqvarna has an exciting future. Where do you see it going?
We have to overtake Triumph and Ducati to become number three in Europe, that’s the short term goal! BMW is number two, and it’s my most liked competitor, plus I appreciate that we got the chance from BMW to take over Husqvarna—I’ll never forget that. I don’t perceive them as a real competitor, more an ally in fighting the Japanese. BMW and KTM are the remaining serious players in Europe, and that’s a little bit sad because of all the others we lost. Even MV Agusta went to the Russians—though that young Russian owner is a nice guy, and intelligent, too. I enjoyed meeting him once—he’s very clever. I was positively surprised.
What are your projections for KTM in the next 10 years? Do you want to bring it to the market via an IPO, or do you want to keep the company private?
I’m already publically listed in Switzerland. I moved from Vienna to Switzerland two years ago, which was a very good decision because the Zurich stock exchange is the second largest in Europe. It has huge liquidity—there’s so much money there, and you can find serious long-term investors there. So 38% of KTM equity is in the market, and 62% is still owned by my family company. So that’s fine, and I think the combination of having a listing with a clear industrial lead is always a good one.
KTM is still growing substantially. How many people do you now have working for you altogether?
Locally we have 3,625 people in and around Mattighofen, and in total something like 4,300 worldwide.
With your forthcoming electro-mobility products, will this have to increase?
Yes, but the production will take place in India, so that’s a big help for us, because one of the bottlenecks here in Central Europe is recruiting workers. Because the demographic development in Europe sees fewer young people and I would say half of them have the wrong education. What we need are digitalization technicians, engineers, laboratory workers and suchlike, and they’re really rare, so it’s not easy to recruit. And we have almost 150 blue-collar lease workers from places like Ukraine, Moldova and so on. Because we simply can’t get people in Austria, so to grow production is not that easy in Central Europe, which means that the capacity they have in India is a big help for me, leaving us to focus on R&D, racing, marketing, sales and suchlike.
In that case, will you consider establishing a manufacturing operation in the USA, which is after all one of your biggest markets?
If we’re forced to do so, we can do it overnight. We understand very well how such operations work, since we already have six offshore assembly facilities in Colombia, Brazil, Argentina, China, Malaysia and the Philippines, plus, of course, our Indian manufacturing base—so we have a blueprint, which makes each one just a logistical issue. But America is still our biggest market with 20% of our production going there, and what’s very interesting is that the specific market segment we are in has been growing continuously for the last couple of years. Only Harley is responsible for a downturn in the overall market, whereas our sales continue to grow, both off-road and on-road. Both are growing, but off-road for sure is very strong. We sold 100,000 off-road bikes last year and 160,000 street. Street is growing faster than off-road, though.
Has off-road topped out?
I would say it has a certain ceiling. But we have 60/70% market share, anyway! But that’s the reason it’s so important to step into the electro-mobility market with sporty products as well, because the E-mountain bike is more or less a twist-n-go off-road Enduro motorcycle. And that’s very important, because our younger customers coming from that area won’t touch combustion engined bikes anymore.
So, to summarize for the future, keep on keeping on!
Absolutely, we have a very bright future in front of us because our specific segment of powered two wheelers is bouncing back as a transportation item, caused by several things. One is traffic congestion in urban areas, it’s also money-wise, because the middle class is drying out of cash. You are quicker on a bike, you take up less space, it’s cheaper to run, and with electric it’s perceived as cool, and you can save the world! It’s the first time that big cities are now thinking how to improve the infrastructure for powered two wheelers, to separate it from the four wheelers, to make separate roads like in the Netherlands. So it’s turning around, and we are part of it. We offer a specific solution for transportation over short distances, which is available here and now. The future is bright for motorcycling, and we see it as very positive specifically for all our three brands, now! CN