Japanese automajor Kawasaki and Bajaj Auto (BAL) have decided to end their eight-year-old sales and services alliance in India. Bajaj said it would be able to increase focus on its superbike KTM.
Speaking to Business Standard, Bajaj Auto's President (probiking) Amit Nandi said, "It is an amicable decision that has been mutually arrived at. On Bajaj Auto's part, the reason is to provide added focus to KTM." Kawasaki officials could not be reached immediately for comment.
Currently, both KTM and Kawasaki products are sold through same outlets.
The alliance will officially come to an end on April 1. However, Bajaj and Kawasaki will continue to maintain their co-operative relationship across the rest of the world for current and future businesses. While this alliance is eight years old, the technology partnership between the two companies goes back to the 1980s.
"The decision for each country is based on the specific merits of association in that particular country. In India there is not much merit to stay associated," said Nandi.
April onwards, Kawasaki would take care of sales and after-sales service, for its existing customers, through India Kawasaki Motors Pvt Ltd. This is a 100 per cent subsidiary of Kawasaki Heavy Industries, Japan, established in India in July 2010, through its own dealer network.
Kawasaki so far had access to 300-plus Probiking/KTM showrooms.
Nandi said KTM was working on the development of an adventure bike. The released capacity in the existing network and the addition of another 100-plus showrooms in fiscal 2018 will help strengthen the KTM business in India. As far as assembly is concerned, Kawasaki has its independent assembly plant even today, he said.
The Bajaj-Kawasaki relationship goes over four decades back with the 99.2cc Bajaj Kawasaki Boxer, an entry level bike, Caliber and others. Bajaj had forged a technological tie-up with Kawasaki in 1984. The arrangement did not entail an equity investment on Kawasaki's part, and it was only as a technology supplier, just like to Honda was in its arrangement with Hero.
By the turn of the century, Bajaj began to become self-reliant in technology. The last motorcycle it built with Kawasaki's technology was the Eliminator in 1999, say reports. It then roped in Austria's KTM, in which Bajaj now holds a 48 per cent stake. Both KTM and Kawasaki brands were sold through the Probiking network.
Analysts said Kawasaki felt its bikes are getting tough competition from KTM, with which Kawasaki shares showroom space. Besides, for KTM bikes are more profitable for Bajaj.
Nandi said brands compete with each other in the customer's mind, not necessarily in showrooms. However, it is true that any dealer will be able to focus on any individual brand if he has fewer brands to handle. That focus will now be on KTM.
He added that a company of Bajaj Auto's size will always have multiple brands with varying degrees of profitability. The larger point is that there has to be a strategic role for each brand in the portfolio. KTMs strategic role is to be the benchmark among sports motorcycles in India which it has been successfully doing with a 48 per cent CAGR and volumes of 37000 units in 2016-17 despite being the highest priced in the segment.
According to Bajaj's 2015-16 annual report, Bajaj Auto International Holdings BV, a 100 per cent Netherlands-based subsidiary of Bajaj Auto Ltd has invested a total of around Rs 1,219 crore in the Austrian firm KTM.
The Bajaj-KTM partnership, launched its first co-developed product, the 200 Duke in 2012. Bajaj manufactures KTM Duke at its Chakan plant and a portion of them are sold through the Probiking network in India, apart from exporting to other countries.
Now the Duke & RC models are being offered in five SKU’s through the 300-plus KTM dealerships in India.
