BMW, TVS Motor Sign India Partnership - Wall Street Journal

By SANTANU CHOUDHURY NEW DELHI--The two-wheeler unit of Bayerische Motoren Werke AG and TVS Motor Co. Monday signed an agreement to develop a new range of motorcycles in India with engine displacement of less than 500 cubic centimeters. The new range would be a first for the BMW unit, called BMW Motorrad, which now makes 19 premium motorcycle and scooter models with 650cc-1,600cc engines in its traditional sport, enduro, roadster, tour and urban-mobility categories. The companies plan to sell the new motorcycles in India and overseas. The partnership with India's fourth-largest maker of scooters and motorcycles by sales is a reflection of the German company's strategy to make motorcycles with engines that are smaller than its current models as it will help it exploit growing demand for such products in emerging markets like India. It extends BMW's January announcement that the company was "realigning" its motorcycle business by expanding its lineup. The changes also included selling the Husqvarna unit, which specialized in high-performance off-road motorcycles, to Austria's Pierer Industries AG. "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," a TVS statement quoted BMW Motorrad President Stephan Schaller as saying. He said the long-term cooperation agreement with TVS is "an important step [for BMW] along the road to profitable, sustainable growth." The partnership could give TVS access to the technology to develop new motorcycles. It would also enable the Chennai-based company to better compete with larger local rivals such as Hero MotoCorp Ltd. and Bajaj Auto Ltd. and foreign competitors such as Honda Motor Co., Yamaha Motor Co. and Suzuki Motor Corp. TVS now produces motorcycles with engine capacities of 110cc-180cc. The partnership with TVS will give BMW a significant foothold in India's growing motorcycle market, the world's second biggest. It would also give the company access to TVS's plants in India. Rising incomes, especially of the country's estimated 250-million-strong middle-class households, have led to the emergence of an attractive growth market although it is relatively small now. Domestic sales of motorcycles with engines bigger than 150cc more than doubled during the 11 months of the past financial year that ended March 31 to 447,266 units from 206,386 a year earlier. The overall motorcycle market in comparison expanded nearly 1% to about 9.30 million units. This growing market has attracted, among others, U.S.-based Harley-Davidson Inc., which currently assembles some of its high-end motorcycles in India. Yamaha, Honda, Suzuki, Ducati Motor Holding SpA and Piaggio SpA's Aprilia sell imported premium motorcycles in India. The agreement "involves the two companies each offering their own vehicle derivatives, which will be sold through their own distribution channels," TVS said in the statement. BMW Motorrad currently sells motorcycles in three Indian cities through two importers. TVS lost its position as India's No. 3 motorcycle producer by market share in the financial year that ended in March 2012. It now ranks behind Hero MotoCorp, Bajaj Auto and Honda Motorcycle & Scooter India Pvt. Ltd. Shares of TVS surged as much as 17% on the news. They closed 9.9% up at 39.85 rupees (73 cents) on the Bombay Stock Exchange, outperforming the main index that remained flat. via Technology - Google News http://news.google.com/news/url?sa=t&fd=R&usg=AFQjCNF_TIzqFsMC2fOYkrAlqqIuZTI6QQ&url=http://online.wsj.com/article/SB10001424127887323550604578409960656038972.html

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