Ever since Reuters broke the news last month that Volkswagen is considering unloading Ducati, the rumor mill has been at full churn trying to figure out where the Italian company would end up. Volkswagen, of course, is on the hook for billions in penalties as a result of the Dieselgate scandal, and finding someone willing to fork over a ten-digit check for Ducati would definitely help.

The list of potential suitors for Ducati isn’t that long. Sure, Ducati might draw interest from a number of investment firms (such as Ducati’s former owner, Investindustrial), but if we’re only looking at established companies in the automotive or motorcycle industries, only a few have the resources and the right corporate synergy to be a fit.

One of those companies is Royal Enfield, the formerly British marque and now a subsidiary of India’s Eicher Motors. Best known for its 500cc Bullet and, more recently, its Himalayan adventure bike, Royal Enfield is the market leader in India for mid-sized motorcycles and has plans for growth in other markets (including North America where the Himalayan is expected this summer).

Royal Enfield Plans Serious Inroads into the US Market

Which is why Royal Enfield has been making the rounds as a potential buyer for Ducati. Royal Enfield had reportedly been approached by about a possible deal by Evercore, the investment bank Volkswagen has engaged to explore options for Ducati. These talks were likely merely preliminary, however, as Evercore’s role is to gauge the market’s interest in Ducati and evaluate whether it makes sense for Volkswagen to sell the motorcycle company.

Comments from Siddhartha Lal, chief executive officer of Royal Enfield and Eicher Motors, downplay the possibility of a deal. Speaking to the Times of India, Lal said: “I have a general view on such things. We are always open to thoughts and ideas. But as you know, we are the most focused and selective company… So basically, without saying absolutely no to anything – because we never say never – we are so zeroed in on our own opportunity that we do not want anything to distract us.”

Eicher CEO Siddhartha Lal not only helped turn Royal Enfield's fortunes, he's also very hands on, personally helping to test the Continental GT before its introduction in 2014.

Eicher CEO Siddhartha Lal not only helped turn Royal Enfield’s fortunes, he’s also very hands on, personally helping to test the Continental GT before its introduction in 2014.

Lal’s a smart businessman, recently named India’s CEO of the year by Business Standard. Lal took over Royal Enfield in 2000 when the company was operating at a loss and Eicher was considering selling it off. Today, Royal Enfield accounts for 40% of Eicher’s revenue and 80% of its profit. Lal’s bright enough not to completely close the door on Ducati, but his comments suggest a tepid interest. Or perhaps he’s just bluffing to gain a better bargaining position. Never say never, right?

Despite Lal’s comments, the Indian press has jumped on the story, going from Evercore testing the waters to Eicher getting ready to cannonball into the lake. Which makes sense as an India-based company buying a notable brand like Ducati would be huge news for them. Likewise, there was similar speculation in some U.S. publications linking Polaris to MV Agusta last year when MV was looking for funding, so this kind of talk isn’t limited to Indian media. Those rumors never went anywhere, and with the decision earlier this year to shutter Victory, we don’t expect Polaris to be a player in the Ducati market.

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Could a deal eventually emerge between Eicher and Volkswagen? Perhaps, but it’s far too early in the process at this point. It’s not clear if Volkswagen has even made a decision to sell Ducati at this point. Volkswagen bought Ducati for about $1.12 billion in 2012 and a potential sale could bring in about $1.6 billion. That’s a lot of money, but it still only covers a fraction of the $20 billion Volkswagen has agreed to spend to fix the Dieselgate mess.

Here’s what we know with a high degree of certainty:

  • The Volkswagen Group purchased Ducati for $1.12 billion in 2012. A potential sale has been tabbed at about $1.6 billion. Ducati is technically owned by Lamborgini, which is a subsidiary of Audi which itself is owned by the Volkswagen Group.
  • The initial Ducati acquisition was seen as more of a personal passion of then-VW Chairman Ferdinand Piech; Piech resigned in 2015, reportedly as a result of a power struggle with CEO Martin Winterkorn, taking the driving force behind the Ducati deal out of the picture. Months later, Winterkorn would also resign after the Dieselgate emissions scandal became public.
  • Volkswagen reached agreements with U.S. agencies to spend more than $20 billion to pay back the damage from Dieselgate. This includes criminal and civil penalties totaling $4.3 billion, a cool $10 billion to compensate U.S. consumers who purchased vehicles affected by Dieselgate, and an additional $2.0 billion investment to develop zero-emission vehicles.
  • Ducati has been profitable for Volkswagen, reporting new sales records each year.
  • Of all of the Volkswagen Group’s subsidiaries, which includes Audi, Bentley, Bugatti, Lamborghini, Porsche and various other automotive brands, Ducati sticks out like a sore thumb. As the only motorcycle maker in the group, there’s very little cross application of technologies between Ducati and the other brands.
  • In late April, Volkswagen reportedly engaged investment firm Evercore to evaluate options which include potentially selling Ducati. Of course, that also means Evercore is evaluating the value of not selling Ducati.

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