Apr 15, 2013

4 TVS-BMW Tie Up: Details are still not clear

Details of what the TVS-BMW tie up is still hazy..

‘Made in India’ bikes in the below 500 cc category

TVS has never made anything Big and BMW has not been successful (recently) at anything Small..!!

This has more or less the headline that accompanies the recent TVS-BMW agreement. Although the official statements make it clear that the tie up would ultimately result in manufacture of motorcycles less than 500 cc, by TVS, for BMW.. the complete details of the tie up between these two companies are not still clear.

And in spite of the details being not clear, this hasn't stopped many to proclaim that "TVS would soon launch 500 cc motorcycles", which actually won't be correct to report unless one is clear what this tie up actually brings to the table for both TVS and BMW.

What's Not Clear?

  • Branding

  • Though the official press release states that "The cooperation agreement involves the two companies each offering THEIR OWN VEHICLE DERIVATIVES, which will be sold through their own distribution channels in India and across the globe", what would be the Branding of these "derivatives"..??

  • Is BMW just outsourcing production?

  • A few publications have mentioned that the technology would be provided by BMW and TVS would manufacture it in India. Which could very well be true, but on the official press release on TVS Motor website, nothing has been mentioned about it. Which leaves it open to speculation whether the engines would be "co-developed" by TVS and BMW or just BMW intends to outsource production to India/TVS and TVS would have no role in the development process.

  • Would TVS be allowed to utilize the technology in their own models?

  • Like how Bajaj has utilized the engine platform of the KTM 200 Duke in the Pulsar 200NS, would TVS be allowed to do so by BMW?

    For the record this is not the first time BMW is outsourcing manufacturing. They have outsourced manufacturing of engines of a few of their models to some Chinese (or maybe Taiwanese) manufacturers, and the models are branded and sold as BMW worldwide with nil branding of the manufacturer that have produced the engines for BMW.

    Difference of the TVS-BMW alliance with the Bajaj-KTM alliance

    Although the TVS-BMW alliance might seem similar to the Bajaj-KTM alliance, there are clear differences between the two.

    From day one when the Bajaj-KTM collaboration was publicly announced (click here to read it), it was made clear that the agreement would result in the manufacture of water cooled 125-250 cc engine platforms which Bajaj would Co-Develop with KTM, manufacture them in India and will be sold world over under the KTM badge. Also according to the official statements, the co-developed engine platforms would also form basis for Bajaj's own products.

    Apart from the clarity of what the Bajaj-KTM agreement brings to the table for each parties, Bajaj currently also owns about 47% (started with 14.5%) stake in KTM. Which means that as KTM benefits, Bajaj also gets the share of its benefits. Also the stake give Mr. Rajiv Bajaj access to the board meetings of KTM.

    On the other hand there is no equity participation of either TVS or BMW in the other's company. Which leaves the question open as to how would TVS benefit if the sales of BMW increases? And also if TVS is not allowed to utilize the tech on its own models?

    Parting thoughts

    Unlike the Bajaj-KTM alliance where both companies were very much used to making motorcycles with small capacity engines, it'll be interesting to see how the TVS-BMW relationship pans out.. for TVS has't made anything above 180 cc and BMW hasn't being really (recently) successful at anything less than 650 cc.

    One'll probably have to wait for a couple of years to see is this recent courtship between TVS and BMW turns out to be a Dream Affair/Stable Marriage or would it be just a casual fling.

    Official Press Release:

    TVS Motor Company and BMW Motorrad Sign Cooperation Agreement

    Chennai, 08 April, 2013:

    TVS Motor Company and BMW Motorrad have signed a long-term cooperation agreement. The aim of the cooperation is to join forces to develop and produce a new series of motorcycles that will cater to the segment below 500 cubic centimeters. This was announced at a press conference today in Chennai.

    The various stages through to the finished serial production motorcycle will be planned by both partners but implemented with different focus areas on each side leveraging the strengths of both companies. The cooperation agreement involves the two companies each offering their own vehicle derivatives, which will be sold through their own distribution channels in India and across the globe.

    Both contractual partners commented on the future cooperative venture at the press conference.

    Stephan Schaller, President BMW Motorrad:

    "In view of changing motorcycle markets, demographic developments and increasing environmental demands we are expanding our product range so as to tap into fresh growth potential. We have a highly expert and experienced partner in the TVS Motor Company. This means that in future we will be able to offer vehicles in smaller capacity classes in addition to the BMW Motorrad core segments. Various types of motorcycle are conceivable: they will meet the expectations of a BMW motorcycle in terms of riding fun as well as setting a new benchmark when it comes to stability, agility and performance figures. I regard this long-term cooperation as an important step along the road to profitable, sustainable growth."

    Venu Srinivasan, Chairman TVS Motor Company:

    "With BMW Motorrad, we see an ideal long-term strategic partner who shares our core values: focus on quality, engineering prowess, innovation and customer satisfaction. We intend to leverage each other's strengths to deliver a new series of products offering cutting edge technology for our customers."

    The cooperation partner BMW Motorrad is one of the world's leading manufacturers of motorcycles and scooters in the premium segment. Celebrating its 90th anniversary in 2013, BMW Motorrad is an integral part of the BMW Group with its brands BMW, MINI and Rolls-Royce.

    As an international company, the BMW Group operates 28 production and assembly plants in 13 countries as well as a global sales network with branches in over 140 countries (BMW Motorrad over 100). The main production facility of BMW Motorrad is located in Berlin, Germany.

    In 2012, the BMW Group sold approximately 1.85 million cars and more than 117,000 motorcycles worldwide. Pre-tax income amounted to around 7.82 billion euros (motorcycles 6 million euros), with turnover at 76.85 billion euros (motorcycles 1,490 million euros).

    The BMW Motorrad model program comprises 19 premium motorcycle and scooter models from 650 to 1600 cc in the categories Enduro, Sport, Roadster, Tour and Urban Mobility.

    The company is market leader in 13 countries, the core markets are Germany, USA, France, Italy and Brazil.

    TVS Motor Company is one of the largest motorcycle manufactures in India with an annual production volume of some 2 million units and a turnover of 1.3 billion USD. TVS Motor Company is the flagship company of the 100 year old six billion USD TVS Group, which has some 40 companies and holdings in the automotive sector. TVS Motor Company offers the widest range of product in the Indian two and three wheeler industry. The company's customer inspired engineering approach, has enabled it to introduce a wide product range that caters to all industry segments. TVS Motor Company has international presence in more than 50 countries in Asia, Africa and Latin America.

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    This is to remind that the Views or Opinions in the blog are entirely mine unless explicitly stated. The Views and Opinions published in this blog should in no way be related to any other person or organization associated -- directly or indirectly -- with me.


    Gunawan MS said...

    I hope this cooperation will pan out well, especially for TVS. They have an Indonesian subsidiary production facility, and unlike Bajaj's shitty Indonesian experience, might be a long term affair with good responsibility to their Indonesian customers. Long live TVS, i said ......

    Anonymous said...

    Your comments are often biased in favour of anything that has to do with Bajaj. Used to enjoy reading your articles, "used" ... As far as TVS-BMW alliance is concerned let time tell the story rather than jumping on prejudiced conclusions. Peace...

    Payeng said...

    @Anon (above)

    It's anyone but me who is making the so called "Conclusions".

    I am just making it clear that their is nothing clear about this agreement as of now

    nikhil said...

    i had a converstion with territory manager of TVS ..he told that it will apache 350cc model from the tvs-bmw alliamce and mostly it will be released in 2015.

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