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Apr 09, 2013 at 09:30am IST

TVS, BMW to jointly develop sub-500cc bikes

Mumbai: TVS Motor Co Ltd and BMW AG's motorcycle division announced a deal on Monday to jointly develop bikes that will give the Indian automaker access to BMW technology as it looks to stem its falling market share. The long-awaited deal should help TVS revamp a dated product pipeline at the company, which has struggled to compete with a recent ramp-up in activity from Honda Motor Co and Yamaha Motor Co and could also help BMW gain a foothold in the world's second-largest bike market.

"We intend to leverage each other's strengths to deliver a new series of products offering cutting-edge technology for our customers," TVS Chairman Venu Srinivasan said, adding that the products would be released in 2015.

Shares in TVS rose as much as 17.3 per cent after the deal was announced, before ending the day up 10 per cent at Rs 39.75 on a Mumbai market that ended flat. TVS will invest 20 million euros in the tie-up, Srinivasan told reporters. BMW declined to provide details of its investment in the collaboration.

TVS, BMW to jointly develop sub-500 cc bikes

Shares in TVS rose as much as 17.3 per cent after the deal was announced. TVS will invest 20 million euros in the tie-up.

TVS and BMW Motorrad will develop and produce a series of motorcycles in the sub-500 cubic centimeter segment, TVS said in a press release, but each company will sell individual versions of the bikes through their own distribution channels. BMW, which sold 117,000 motorcycles in 2012, is heavily dependent on Western markets such as the United States, Germany and France, and has a negligible presence in India, where annual sales trail only China.

The German manufacturer will use the partnership with TVS to develop small, less powerful motorcycles, BMW Motorrad President Stephan Schaller said.

TVS has seen its sales fall more than 6 per cent this financial year that ended in March, against a 4 per cent rise for the overall industry, and has struggled since market leader Hero MotoCorp's 2011 split from former partner Honda sparked a jump in competition and a market tilt towards higher-end, more advanced vehicles.

India's No.3 manufacturer in the economy segment of the motorcycle market, TVS lags well behind its rivals in the higher-margin premium segment. Premium sales grew by around 25 per cent in the year to March 31, outpacing all other major segments and driving much of Honda and Yamaha's overall rise.

TVS' price to earnings ratio considerably lags Hero and Bajaj Auto Ltd. TVS trades at an around 25 per cent discount on a one-year forward earnings basis to Hero and Bajaj, according to Thomson Reuters data.

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