NEW DELHI – July 9, 2012 – TVS Motor Co. is in talks with BMW AG’s motorcycle division for a possible technological alliance, a move that may help the Indian company in developing higher powered two-wheelers to compete with local rivals Hero MotoCorp Ltd. and Bajaj Auto Ltd. as well as Japan’s Yamaha Motor Co. and Honda Motor Co.
“We will share more details on the nature of the talks in due course,” Venu Srinivasan, chairman of Chennai, south India-based TVS, said by phone on Monday.
A technological alliance is key for TVS to expand its product portfolio and arrest dwindling market share. TVS lost its position as the third-biggest scooter and motorcycle maker by sales in the last financial year ended March to Honda’s two-wheeler unit in India.
A collaboration will help TVS develop bigger motorcycles and be better equipped for the fast-changing Indian two-wheeler market. Even though two-thirds of motorcycle sales in India are in the entry-level segment — with engines in the 100-125 cubic centimeter range –the market for bigger motorcycles is expanding rapidly.
Local sales of motorcycles with engines above 125cc rose 17% in the past financial year to 2.99 million units. The growth outpaced a 12% rise in total local sales to 10.1 million motorcycles.
“A pact with BMW will change the fortunes of TVS,” said Deepak Jain, an auto analyst at Sharekhan Ltd. “TVS has been stuck with its products, and technology from BMW will help it become a major player in the bigger-motorcycle segment.”
Mr. Jain said a possible pact will also help BMW as the German auto maker can utilize TVS’s sales network to sell its products in India.
A BMW India spokesman didn’t respond to calls.
Shares of TVS rose on the news and at 0647 GMT they were up 6.4% at 38.95 rupees on the Bombay Stock Exchange, where the benchmark index was down 0.8%.
Earlier Monday, the Mint newspaper, citing Mr. Srinivasan, said TVS isn’t considering selling any stake to BMW.
If talks with BMW conclude favorably, TVS will join Hero MotoCorp and Bajaj Auto in tying up with global two-wheeler makers to source technology for making larger motorcycles.
Hero MotoCorp had recently signed an agreement with U.S.-based Erik Buell Racing LLC for sourcing engines, while Bajaj Auto uses the technology and sells some products of Austrian bike maker KTM Power Sports AG, in which the Indian company has a 47% stake.
BMW’s motorcycle division, BMW Motorrad, sells models under its R and K series and the S 1000 RR superbike in India.
BMW Motorrad’s chief, Hendrik von Kuenheim, said in February the company was seeking partnerships with two-wheeler manufacturers in emerging markets, including in India, to locally build its motorcycles or some parts.
(SOURCE: Wall Street Journal through Motor Sports Newswire)
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