Mumbai: Sports utility vehicles and tractor maker Mahindra &Mahindra (M&M)is reportedly seriously evaluating an entry into the low cost entry level two wheeler segment possibly with an eye on the rural market.
M&M has set up a separate team that will look at all aspects of the two-wheeler business - from research and development (R&D) activities as well as sales and marketing. Operations of the two-wheeler business will function independently.
While on the one hand M&M is said to be eyeing Kinetic Motors, which is desperately looking for a buyer for its languishing two wheelers business, the Mumbai based company has reportedly evinced interest in Italian bike manufacturer MV Agusta. The Italian company has been in financial trouble for some time due to low production and limited sales which has left it with no finances for new bike research and development. The owner of MV Agusta Claudio Castiglioni is said to be looking for potential investors / partners.
M&M has already bought a controlling stake in Italian automotive design house, Stile Bertone. A couple of years ago M&M was said to be in talks with Chinese bike maker Lifan for a possible tie up. According to sources, M&M had recently tested an entry level 100cc bike along with a premium 150-175cc cruiser---both bikes being from China.
On the face of it there may not be any immediate synergy between M&M and MV Augusta but with the market for entry level bikes tapering off in urban areas M&M could be looking at shifting focus to high end bikes for its urban markets.
M&M is also in the race for acquiring scooter maker Kinetic Motors. The acquisition will provide M&M with ready infrastructure as it will get an installed manufacturing facility with workforce, suppliers, a distribution network and sales outlets.
M&M is known to have advanced expertise in the R&D department that it may utilise for two-wheelers. Besides, it will create the ideal platform for the company to enlarge its reach into the rural market say industry experts.
Experts say that the push in rural markets provided by the motorcycle foray will help M&M widen its network and brand image in the interiors of the country, something which is crucial for its four-wheeler business to expand at later stages.
Kinetic Motors has been incurring losses for the last three years. Analysts say Kinetic's revenues have crashed in the last few years leading to lower valuations for it. However, it is a well-known brand and if M&M acquires it, it will not only fulfill its s long standing desire to foray into the two-wheeler segment. Moreover Kinetic's lower valuations will make it a relatively inexpensive acquisition that will be cheaper than venturing all alone.
(KMC) has been evaluated at around Rs125 crore by a US-based private equity fund. The Firodias which have a controlling stake in Kinetic Motor prefer M&M as it can bring in the necessary working capital, clear Rs60 crore of long-term debt and also invest year-on-year in development and marketing of products.
Kinetic Motor's current installed capacity at its Pithampur two-wheeler facility is 2.5 lakh units that can be ramped up to 4 lakh, if required. The present production is around 80,000 units annually. Kinetic Motor Company
Many two wheeler makers are eyeing rural India as the next bastion to be broken. Demand for two-wheelers is said to be rising in rural areas and two-wheeler maker Hero Honda has already reported higher motorcycle sales from small towns and villages primarily due to its increased push in marketing and sales activities in the rural and semi-rural areas.