Motorcycle Maker KTM Passes Harley and Aims at Kawasaki

KTM is now gunning to become one of the top three manufacturers of full-size motorcycles. In the past decade, Pierer has more than quadrupled sales even as the European market for two-wheelers shrank 14%. He says new designs and a greater focus on Asia will help him reach annual sales of 400,000 by 2022, which would put him within striking distance of today’s No. 3, Kawasaki Motors Co.

Still, by many measures KTM remains a bit player. Although last year it sold 261,000 bikes—35,000 more than Harley did—the American company generates three times KTM’s revenue of $1.75 billion, because most of its bikes are far more expensive. Including smaller models such as mopeds and scooters, KTM is still behind Piaggio Group (the maker of Vespa) in Europe. And globally it’s an also-ran. Honda Motor Co., for instance, sold 20 million two-wheelers last year, and No. 2 Yamaha Motor Co. sold 5.4 million. Being based in Europe presents assorted challenges: Sales in the region have stagnated since 2010, at about 1 million bikes per year, and stricter rules on emissions and noise threaten to further depress them. “Making motorbikes cleaner and quieter costs a lot of money, and so does developing electric engines,” says Jürgen Pieper, an analyst at Bankhaus Metzler in Frankfurt. “A brand like KTM that’s known for sports and racing may find it difficult to maintain its image while adopting more environment-friendly technologies.”

KTM dominates Mattighofen, the town of 6,000 just south of the German border where it was founded in 1934. As Austria emerged from the rubble of World War II, KTM churned out inexpensive, durable two-wheelers to help a broken nation hit the road again. Over the next four decades, founder Hans Trunkenpolz and his son Erich built KTM into a national icon with bikes suited to Austria’s rugged Alpine terrain. But when Erich died on Christmas Eve in 1989 at age 57 with no heirs, the company ended up in the hands of outside investors with little industry knowledge who soon rode it into insolvency.

Enter Pierer, who’d been introduced to KTM by acquaintances working with the company. He paid only $4 million ($7 million today) and quickly dropped mopeds and street bikes to focus on off-road motorcycles. In 1993 he sent a team on the three-week Paris-Dakar rally, an unforgiving trek across the Sahara Desert. After a bumpy start, KTM has won the competition every year since 2001, creating a mystique that’s made the bikes must-haves for motocross fans worldwide.

Pierer reintroduced road models two decades ago, and today they make up about half of sales. Then in 2007 he formed a partnership with India’s Bajaj Auto Ltd. The company is the world’s largest maker of three-wheelers—used as taxis in developing countries—but it lacked technologies such as four-stroke engines, fuel injection, and anti-lock brakes. In exchange for updating Bajaj’s offerings, KTM gained a manufacturing base with wages just a fraction of those in Austria and a strong dealership network in the world’s biggest market for motor­cycles. The companies are developing small electric models to be built in India and sold under both brands.

In 2013, Pierer spotted an opportunity to supercharge his expansion: buying Husqvarna from BMW AG, which had bought the Swedish nameplate a few years earlier but decided the off-road brand didn’t fit the German com­pany’s lineup of highway rockets. Husqvarna helped KTM achieve something akin to the auto industry’s strategy of making multiple models based on almost identical parts. The two brands today share engines, suspensions, gearboxes, and other components but retain separate identities vis-à-vis consumers. “KTM and Husqvarna are rivals on the racetrack and when it comes to sales,” Pierer says. “For everything else, they are family.”

His aim now is to do something similar with Ducati, the spicy Italian nameplate that Volkswagen AG is considering selling, and Triumph, a venerable British brand that’s been struggling to sustain its growth. The companies each sold about 60,000 motor­cycles last year—too small, Pierer says, to effectively compete. He’s seeking tieups that would benefit all parties by spreading development costs across a larger number of bikes. “We’re savaging ourselves in Europe,” Pierer says. “Let’s create a united European motorcycle company.” Triumph says it has no plans to sell.

Pierer has made his share of missteps. A partnership with U.S. off-road vehicle maker Polaris Industries Inc., which owns the classic Indian Motorcycle brand, foundered over strategic differences. KTM’s first four-wheeler, a $135,000 roadster called the X-Bow that was introduced in 2007, never really took off. Dealers say aggressive sales targets in recent years have required heavy discounts to move inventory, threatening the brand’s . And Pierer missed an opportunity to buy KTM’s bicycle business, which is now thriving under a separate owner.

The pedal-bike unit would have given Pierer a stronger foothold in electric bikes, which he expects to account for the bulk of commuter cycles within five years. Although he’s sold 5,000 full-size electric motorcycles since 2014, he says the technology is expensive and ill-suited to such bikes, because the high voltage needed to power them can be dangerous. But he predicts that about a quarter of KTM’s 2025 revenue will come from battery-powered mopeds and pedal-electric cycles. “E-bikes are becoming a huge deal,” Pierer says. “The market has exploded, and as a large manufacturer, you have to be there.” —With Matthias Wabl

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