BMW Motorrad’s quest for sustainable profitable growth through smaller bikes and TVS Motor’s strategy to enter the premium segment brings both into a new alliance. SumantraBarooah has the details of this Indo-European partnership.
Two years from now, there could be at least one motorcycle that wears a BMW badge and its different-looking twin sporting a TVS badge. That’s what a new joint technical cooperation and manufacturing agreement between the Indian two-wheeler maker and the German luxury OEM promises to achieve.
While there is no fixed term for the agreement now, both partners aim roll out the first product “some time in 2015”. “As long as we have a win-win situation and both parties benefit from that, both parties will continue. This (partnership) can be very long,” says Stephan Schaller, president, BMW Motorrad. He was speaking at the press conference in Chennai on April 8 to announce the alliance between BMW Motorrad and TVS Motor.
At the meet, both parties said they would work collaboratively on products below 500cc which effectively means bikes above 200cc. BMW Motorrad’s current product range consists of 19 premium motorcycle and scooter models ranging from 650cc to 1600cc.
The partnership gives TVS the opportunity to enter segments above 200cc where margins are better than in the cut-throat entry-level segment in which its products sell currently. “The tie-up gives us the ability to manufacture products above 250cc which we do not make today,” says VenuSrinivasan, chairman and managing director, TVS Motor, who adds that he is impressed with BMW Motorrad’s focus on technology, quality, durability, reliability, engine performance, emission standards and the high end manufacturing processes.
Quality with scale
According to Srinivasan, TVS Motor’s ability to develop small products (by international standards) in mass scale with the right quality and good production engineering and with a robust supply chain were the rationale for BMW choosing it as its partner.
The agreement, inked in Chennai last fortnight, is the culmination of negotiations by both parties over two years or so. The various stages through to the finished serial production motorcycle will be planned by both partners but implemented with different focus areas with each side leveraging strengths of both companies. The products will be manufactured either at TVS Motor’s Mysore or Hosur plant.
The cooperation agreement involves both offering their own vehicle derivatives, which will be sold through their own distribution channels in India and worldwide. In markets where both OEMs will sell jointly developed products, the BMW version could be priced at a premium over the TVS version. “A variety of motorcycles are conceivable that meet the expectations of BMW motorcycles in terms of riding fun as well as in setting benchmarks in terms of stability, agility and performance,” says Schaller.
While TVS Motor will invest 20 million euros (Rs 142 crore) on manufacturing operations, BMW Motorrad will invest in development and testing. The German partner has not divulged its level of investment. Though TVS will manufacture the products, it will also play an active role in product development activities as well and here is where its R&D strengths will receive a new exposure.
The TVS-BMW agreement does not involve any equity partnership. The latest agreement is the second partnership for TVS with another OEM. It had a joint venture with Suzuki Motorcycle of Japan in which TVS Motor bought out the Japanese company’ stake in the year 2000.
BMW’s entry into the segment below 500cc is also part of its strategy to tap into the emerging markets of Asia and South America. Lower labour and production costs in India, compared to its home market, will help BMW Motorrad to reap more benefits.
The announcement of the TVS-BMW partnership comes two months after BMW’s announcement of selling its Husqvarna motorcycle brand to PiererIndustrie AG (Austria), promoted by Stefan Pierer, co-owner and CEO of KTM. Interestingly, Husqvarna is expected to enter India in 2015, when the first product from the BMW-TVS partnership is expected to hit the roads.
Asian partnerships
BMW Motorrad ’s tie-up with TVS, though of a different kind, parallels some of its partnerships in Asia. It has struck partnerships in Taiwan and China for sourcing engines. Its partner in China – Loncin – assembles a 650 single-cylinder engine for BMW models. Kymco, its partner in Taiwan produces a 650 two-cylinder engine for BMW’s new scooters – C600 Sport and C650 GT. Kymco also produces the 450cc single-cylinder engine for Husqvarna. All these engines have been developed by BMW Motorrad.
With India now a part of its Asian gameplan, the manufacturing operations at TVS Motor’s plants in India will serve as a third production base for BMW Motorrad, whose other plants are in Berlin and Brazil. ?
INTERVIEW WITH VENU SRINIVASAN, CMD, TVS MOTOR
What led to TVS Motor joining hands with BMW, and not any other OEM for the technology partnership?
We share the core values of passion for excellence in quality, engineering prowess, innovation and customer satisfaction.
What do you think worked in TVS Motor’s advantage for BMW Motorrad to choose it as a partner to help enter new segments of the global motorcycle industry?
BMW found in TVS Motor Company an experienced partner who can offer high-quality engineering and competence in mass manufacturing. They are positive that TVS Motor will meet their high technical expectations in collaborating with BMW motorcycles as they were impressed with our engineering , our factories, and commitment to quality.
What scope does TVS Motor see in the 200cc and above segments, in India and in its export markets?
This segment is beginning to take roots in the Indian market and is growing steadily. This will turn out to be an interesting market in the future, as the economy grows.
TVS has fairly strong R&D capabilities. Will it leverage the capabilities to expand its portfolio beyond the Apache 180 RTR?
We do have strong and capable R&D and we will continue to design and develop exciting new products.
Will the tie-up with BMW also lead to rolling out premium scooters?
We have announced that we will make motorcycles below 500cc jointly.
Given that TVS Motor has a manufacturing base in Indonesia, will the TVS-BMW partnership tap that opportunity to rollout products under TVS and / or BMW brands for the ASEAN markets?
I cannot speak about Indonesia in particular but all new products produced at our plants in India, including the new range with BMW, will be available both in India and globally under the TVS brand.
INTERVIEW WITH STEPHAN SCHALLER, PRESIDENT, BMW MOTORRAD
What are the key reasons that led to BMW Motorrad joining hands with TVS?
In the context of changing motorcycle markets, demographic trends and increasing environmental demands, BMW Motorrad will expand its product offering even further. We are currently in the process of realigning our motorcycle business in order to maintain profitable and sustainable growth over the coming years.
One focus will be on urban mobility and e-mobility. Another logical 'next step' is the entry into the segment below 500cc, thereby tapping into sales potential in the emerging markets of Asia and South America, where motorcycles with a smaller capacity are especially in demand.
Therefore, BMW Motorrad and TVS Motor Co have signed a long-term cooperation agreement. In future, we will be able to offer vehicles in smaller-capacity classes in addition to the BMW Motorrad core segments from 650 to 1600cc. I regard this long-term cooperation as an important step along the road to profitable, sustainable growth.
I am glad that with TVS we have found a highly expert and experienced partner.
Will BMW also manufacture any of the below-500cc products in its Brazil plant?
BMW Motorrad runs a CKD assembly plant in Brazil. This plant can theoretically assemble every BMW Motorrad motorcycle.
Does BMW Motorrad see potential in tapping TVS Motor’s Indonesia plant to assemble products for the ASEAN or any other market in the Asia-Pacific region?
We will now set up the processes for the products that will be built in India.
Of the 117,000 units in 2012, how many BMW motorcycles were sold in Asia?
Historically, the core markets of BMW Motorrad are in Europe and the USA. Of the over 117,000 units in 2012, we sold more than 10 percent in the Asian markets. With TVS as our partner, we intend to enter the segment below 500cc in the future, thereby tapping into sales potential in the emerging markets of Asia and South America, where motorcycles with a smaller capacity are in demand.
What is BMW Motorrad’s outlook for the Indian motorcyle market? What is the retail network expansion plan in India? How many bikes has BMW Motorrad sold so far in India?
India is a very interesting future market for BMW Motorrad. This is due to the fact that it features a fast-growing group of buyers interested in buying premium products.