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The world's largest motorcycle manufacturer considers Ducati purchase

By

March 6, 2012

Valentino Rossi tucked in at full noise on the 1000cc Ducati Desmosedici MotoGP bike.

Valentino Rossi tucked in at full noise on the 1000cc Ducati Desmosedici MotoGP bike.

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If you've been having trouble comfortably wrapping your brain cells around the concept of what were once proud national symbols of excellence changing countries, such as the Malaysian-owned Lotus, the Chinese-owned Saab and MG or the Indian Jaguar and Range Rover, then please be seated before reading further. It seems that India's Hero MotoCorp, the world's largest manufacturer of both bicycles and motorcycles is considering the purchase of Italy's deeply loved manufacturer of sports motorcycles, Ducati.

To think that a brand that so closely aligns with Italian excellence and pride might become a symbol of India's rise to power is possibly unthinkable to the Ducati faithful, but the cold hard facts are that Ducati is up for sale, with a reported price tag of around a billion dollars, and with its own MotoGP programme, superbike heritage, technology and design, it's the perfect fit for a company like Hero that has 3,000 dealerships and needs a new non-Honda range of motorcycles just a few years from now.

Hero has grown rapidly as India has motorized, and recently ended its 25 year association with Honda Motor Corp. With cash reserves believed to be in the vicinity of US$1,000 million dollars, the company is now in acquisition mode as it seeks to replace Honda's technology with its own.

Most major automotive and motorcycle manufacturers have built their company on the home market initially, and Hero already has built itself a sizeable fortune selling low-priced scooters and motorcycles to the world's second largest country.

Just as automotive manufacturers are lining up for a crack at the burgeoning Chinese automotive market, the opportunity in India may be trailing the Chinese market penetration of the automobile, but the opportunity is even greater.

In 2009, China had a per capita vehicle ownership of 128 per thousand people (0.128). If it had the same per capita car ownership figure as the US currently has, there's be double the number of cars on the planet. Remarkably, China's per capita vehicle ownership levels are the same as America's were in 1923.

India's population will be the largest of any country 30 years from now - 1.5 billion human beings.

India's vehicle ownership ratios are currently the same as America's were in 1912 - when the Model T Ford was top seller.

Between now and when the Indian population can afford to buy cars, they will buy motorcycles. Last year just shy of 10 million motorcycles were sold in India, and Hero MotoCorp is planning to sell that many of its own brand just four years from now.

Hero famously got its start manufacturing bicycles for the home market in 1956, evolving from a family-owned bicycle parts business established in post-ww2 Amritsar. As India's massive population needed transport the company's bicycle manufacturing business grew every year, becoming the largest bicycle manufacturer in the world during the 1980s.

Using the cash generated by the bicycle business, Hero diversified and in 1984, partnered with Honda to create Hero Honda. The company's success has been astounding since.

By 2004, Hero Honda had become the world' largest manufacturer of two-wheelers, driven by its dominant 50% share of the Indian market.

The high standards of the company's manufacturing capability need little validating other than a list of clients for which it manufactures a comprehensive array of high tech parts, from engines to entire vehicles - Toyota, Nissan, General Motors, Rotax, BMW, Bosch and LG.

In 2010, Honda sold its shares in Hero Honda to the Munjal family and has set up in India to produce its own motorcycles independently, while Hero Honda has become Hero MotoCorp and intends to go it alone. The upside of owning its own technology is that it can apply its massive manufacturing scale to supply motorcycles worldwide, and obviously, Ducati's global network provides another opportunity for expansion.

The contract with Honda involves the continued supply of Honda models and technology until 2014 - after that, all Hero's designs and technology will need to be licensed, purchased or developed.

Troy Bayliss on Ducati's newest superbike. A generation of two of big V-twins down the tra...

Acquisitions is the route the company has decided to take and it recently entered into a partnership with Erik Buell which might well see Erik one day given the opportunity to design whole motorcycles without needing a legacy powerplant. That's exciting in its own right.

As I write this, I am wondering just what the general reaction of Ducati fans might be. If Ferrari, a company so closely aligned with Ducati that they share race sponsors and even press events, were to be offered for sale to any foreign company, I suspect there might be government intervention.

Valentino Rossi gets the Ducati Desmosedici MotoGP bike sideways

That's unlikely to happen with Ducati - it's clearly for sale and money talks all languages, so unless an Italian buyer emerges, Hero MotoCorp might well become the proud owner of one of Italy's most visibly successful companies.

It's far too soon for any indications on what Hero might do with the Ducati brand and its technologies but anything is possible. If you have fears that the Ducati name will be discontinued, fear not - there's plenty of life in the company yet, just maybe not in Italy.

Iconic national symbols have been treated well by India in the past, with Range Rover and Jaguar strengthening their positions under Tata, and even the Royal Enfield Bullet is still manufactured and sold in India.

It's also quite ironic that Hero's main local competitor, Bajaj Motors, owns 40% of another iconic national motorcycle manufacturer - Austria's KTM. Bajaj recently opened 34 KTM stores in India and is heavily promoting the Duke 200 sports bike to the growing sports bike market.

One of the strongest possibilities if the Ducati sale goes through to Hero, is that we are almost certain to see small capacity Ducati sports bikes again.

The world's largest motorcycle manufacturer considers Ducati purchase
About the Author
Mike Hanlon After Editing or Managing over 50 print publications primarily in the role of a Magazine Doctor, Mike embraced the internet full-time in 1995 and became a "start-up all-rounder" – quite a few start-ups later, he founded Gizmag in 2002. Now he can write again.   All articles by Mike Hanlon
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14 Comments

As my British grandfather said once, when he read about Britain's intention to legalize homosexuality: "No, this world is useless, it has no future!". I would like to see him today, in this globalized world. Brands will no longer be objects to inflame national proud. They are just commodities, traded by stateless, asemic capitals.

Leon Aguilera Radford
6th March, 2012 @ 03:18 pm PST

Well,I've seen the Indians come a long way-early 80's and you'd have to have been desparate to buy a Baja scooter. Just like Korean cars,they are biting at the heels of many other brands now. Just keep and encourage the engineers in Italy and it will end up OK.

But I wonder if the head of VW will be a late charger in the race to own Ducati.

gragraposker
6th March, 2012 @ 05:03 pm PST

@dear editor:

The title mentioned "The world's largest motorcycle manufacturer", which, I understand, refers to Hero MotoCorp, while the Company was only referred to as "the world's largest manufacturer of both bicycles and motorcycles".

Well, the world's largest manufacturer of BOTH "bicycles" and motorcycles does not necessarily is the world's largest motorcycle manufacturer!

MotorCraze
6th March, 2012 @ 06:45 pm PST

@MotorCraze: Seems there is some confusion. "Hero Motocorp" is worlds largest Motorcycle Manufacturer company. Also "Hero Cycles" which manufactures Bicycles is the worlds largest Bicycle manufacturer company.

So It is not like

Hero Bicycle + Hero Motorcycles= Worlds largest Motorcycle Manufacturer.

It is

Hero Motocorp : Worlds Largest Motorcycle Company.

Hero Cycles : Worlds Largest Bicycle Company.

Jay Temkar
6th March, 2012 @ 09:15 pm PST

Dont know why people have such a inferior outlook on indian companies.

Everyone knows how much jaguar and landrover brand sales have increased worldwide after takeover by TATA.One can very well be assured that the Brand heritage of ducati would not be affected after takeover by Hero motor corp.

And Hero motor corp is not a bicycle manufacturer!

Pragadish Nandakumar
7th March, 2012 @ 06:31 am PST

As a long-time Ducati fan and owner (I currently have 5, ranging from 1950-2000), I can't justify buying another if they are no longer an Italian company. It goes beyond a flag-waving symbol of nationalism; Italians have a centuries-old legacy of craftsmanship, and it shows in the products they produce and the pride that goes into producing them. Without Italian leadership, I fear that craftsmanship will be lost to the accountants.

Having lived in Asia for a while, and seeing that the first and foremost goal of any business is profit; leaving brand history, image, and quality a distant second, I simply can't see the company continuing along the same path. Ducati has built a rabid following because of the blood, sweat, and tears that are poured into everything they have created, not because there are dealerships on every corner and are sold simply as commodities.

erock5000
7th March, 2012 @ 06:56 am PST

The Ducati brand will remain unaffected and will remain Italian, only the ownership changes. This is because as noted, the nationality itself too is a brand, doesn't change and sells well. The foreign company will be foolish to lose the company brand image. Range Rover and Jaguar do not feel Indian. Only ownership changes.

Plus, profit too keeps the company going and finally in the position to purchase higher brands, enriching themselves.

If we only think of craftsmanship, finally a company goes bust and has to be sold. But it's not black and white between craftsmanship and profit, everyone tries to do best.

Dawar Saify
7th March, 2012 @ 08:26 am PST

If the sale goes through I'll be selling all of my Ducati's, they can takk all of our IT jobs for less pay but I'll not own a Ducati if it's owned by India, not to mention what Erik Buell might do to the design. I've already seen some impact of this sale, poor settlement of the fuel tank issues with ethanol, less support to events.

Two Lane Fun
7th March, 2012 @ 01:22 pm PST

Do not assume that the Indians do not feel passion,a while back I was on a religous pilgrimage in India.I ended up at Guru Sika,went into the little cave on top of the mountain to seek enlightenment with the holyman-we ended up talking about cricket. As I said before,leave the engineers in Italy and let them be-and all will be well. When the company is in the hands of people who understand the industry(not Bankers),the employees and artisans will be better. The bosses know that what wins on sunday,sells on monday. Where's the problem?

gragraposker
7th March, 2012 @ 01:36 pm PST

I've been around bikes and owned bikes going back into the 1950s. Ducati back in the day had a lousy reputation for quality control. One of my school friends had a small Ducati, new, with only a few miles on it. The frame snapped in half on the way to school one morning. Lately things have gotten a lot better for Ducati. But an infusion of big money such that their technology can be expanded and the best tooling for new factories could bring huge gains for any company and maybe even the public as well. Efficient production can lower product prices so quality can actually go up even whikle prices go down.

As far as where an item is made I can tell you that I purchased a lot of brand new Volkswagons. The best I ever purchased was cranked out in Mexico. Yet at the dealerships customers have no clue and pay extra for "Wolfsburg" produced VWs. The new and better factory is in Mexico.

Jim Sadler
7th March, 2012 @ 03:37 pm PST

If the Chinese can manufucture quality goods for big brands like Nikon and Yahama.... no reasons why the Indians can own Italian brands without impacting the product quality

3razer
8th March, 2012 @ 08:11 pm PST

Only owner is going to change..rest of the company including Designers, Engineers and Workers will remain same. Ducati has been sold many times before as well. The present owner bought it only by the intentions to sell it in 2-3 years and to make profit. He selling it at 3 times the cost which he had paid in 2008.

Jay Temkar
8th March, 2012 @ 11:15 pm PST

"One of the strongest possibilities if the Ducati sale goes through to Hero, is that we are almost certain to see small capacity Ducati sports bikes again."

That would be really cool.

Andreja Sinadinovic Vijatovic
30th January, 2013 @ 10:35 am PST

Having a Family owned Company buy Ducati would be wonderful because it is obvious to me that this is one family that knows how to not get ahead in Business but is also tuned in what the youth of the Globe want, not just their Corp. shareholders. This is a key issue, since giving customers exactly what they want has never been very important to most Big manufacturers!

I'm thinking synthetic oil, better air filters and really long service intervals would all make owning a small 'cycle a no brainer, especially in third world countries or even for local around town use in most urban areas!

+

I hope they bring back the small mini cycles of the 60's which were fun to drive but they also got big mpg. New eVehicle designs will no doubt have shaped batteries and perhaps even a micro propane fueled engine to charge them if needed.

CaptD
18th February, 2014 @ 10:20 am PST
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