BMW Motorrad and TVS Motor Company recently signed a long term co-operative agreement, through which they will be jointly developing and producing new motorcycles under 500cc engine capacity. The collaboration will see both companies selling their own products through their own distribution channels in India and in other countries. After splitting with Suzuki Motor Corp more than ten years ago, TVS Motor’s sales in the Indian market has been dwindling amidst stiff competition, which is being led by Hero MotoCorp, Honda and Bajaj Auto respectively.
Even after its collaboration with BMW Motorrad, TVS is not expected to overtake the leading trios of the Indian two-wheeler market. Firstly, the alliance between the two manufacturers will see their first product rolling out not before 2015, which is a good time of two years and by the time the competition amongst the leading two-wheeler makers will get stiffer. Secondly, both the manufacturers are new to this segment of 500cc category, as TVS is good for bikes in the sub-250cc category while BMW makes bikes in the 600-1600cc category.
Lastly, even if they introduce new products in 200cc-plus category, they will not be able to churn out good volumes as the 200cc-plus category makes up for only about 2.5 percent of the Indian two-wheeler market. Compared to the Bajaj-KTM alliance, TVS-BMW collaboration is a non-equity alliance, where TVS is seeking for technology and oversees market access and BMW is looking out for lower manufacturing costs. Bajaj-KTM on the other hand has strong equity alliance, where Bajaj Auto is holding around 48 percent in KTM.
In terms of financial benefits, the Bajaj-KTM alliance has upper hand over the TVS-BMW alliance, where Bajaj Auto earns good amount of money if KTM does well in the market, whereas TVS has little to gain if BMW does good numbers. Brand positioning is also a crucial aspect to be observed in collaboration, where Bajaj-KTM partnership gels well with the sporty image of the Pulsar and the Duke family, whereas in the case of TVS-BMW, both are vastly different brands for the fact that TVS is known for offering affordable products, while BMW is known for high-end premium performance oriented bikes.
That said, TVS still has a slew of products lined up for India, which will help it to boost volumes. The TVS-BMW partnership might not amount for large volumes for the Hosur based manufacturer, but the company does have quite a few interesting and unique products to offer Indian customers. Coming in 2013 is the Victor, a new 125cc scooter and the Qube hybrid scooter (a very unique product). All this should help TVS in boosting sales, ensuring a healthy growth in volumes.