Interview with KTM's Stefan Pierer – Part 1
The Roll Call of Success
As the Coronavirus pandemic gradually disappears in the rear view mirror of history, in its aftermath the global motorcycle industry continues to experience rapid and sustained growth. Leading this charge among European companies is the KTM Group, whose parent company PIERER Mobility AG finished 2022 on a continued high, after a 12th successive record year which saw sales of its three current brands KTM, Husqvarna, and GASGAS continue spiralling upwards to 375,452 motorcycles in 2022, an increase of 13% compared with the previous year’s 332,881 units. Of those, 268,575 of these motorcycles carried the KTM badge, 75,266 were Husqvarnas and 31,651 were GASGAS motorcycles, a sales volume of 375,492 motorcycles. Add to that the 118,465 pedal cycles and E-bicycles sold in the same period under its Husqvarna, GASGAS, Felt and R Raymon labels (up 15% compared to 2022’s 102,753 bikes), and the company’s overall revenues increased to EUR 2.437 billion in 2022, up 19% year-on-year.
This resulted in an EBIT (Earnings Before Interest and Taxes) gross profit of EUR 235 million, a massive 22% increase over one year ago, meaning its President/CEO Stefan Pierer, 66, duly celebrated the 30th anniversary of his taking control of a bankrupt KTM and its 160 employees in January 1992, and making 6,300 motorcycles that first year, by consolidating his place as the most significant figure in the European motorcycle industry. PIERER Mobility is a global player in practically every different model sector, both on and off road, with both combustion engines and, increasingly, electric power. The chance to speak with him at length for the first time in two and a half years in his office in KTM’s home factory at Mattighofen in West Austria, uncovered the background behind this roll call of success, and his plans to build on it for the future.
Interview with KTM’s Stefan Pierer – Part 2
Interview with KTM’s Stefan Pierer – Part 3
Alan Cathcart: Stefan, in 2022 PIERER Mobility achieved its twelfth year in a row of record sales, with a 19% increase over 2021. But, could it have been even better than that if not for problems with the supply of components?
Stefan Pierer: Yes, I’m sorry to say that we lost 15,000 units in the first half year of 2022, owing to our Tier 1 electronics supplier Bosch operating a sort of triage system, whereby they reduced the supply of all orders by 30%. So, we got 70% of what we ordered from them and missed 30%, which in overall terms equals 15,000 streetbikes which we had customers waiting for. So, apologies to them – but it was outside our control. Otherwise, we might have ended up with a 35% sales increase instead of just 19%! And then, there was also the boom in demand both for the new five-nanometre semiconductors, and the old 20-nanometre type. They stopped production of the 5nm ones to increase the quantity of the 20nm versions, but still we had limited availability.
AC: Has the war in Ukraine affected your production, also?
SP: Not in the motorcycle business, more for the car industry, because there are some specific supply companies located there. So, automotive wiring harnesses and suchlike were heavily affected, but not for motorcycles. In the short term, the escalating price of energy supplies was a concern, although that’s finally reducing at last, but jumping back to the first half of last year, the incredible, ridiculous increase in transportation costs due to the constraints in the supply chain were a serious concern. So, we had double digit cost increases for air freight, and sea freight was up to eight times higher! Normally, a 40-foot container from China to Rotterdam or Hamburg should cost around $3,000/3,500, but a year ago, it was $24,000! And when you asked the logistics company, “Hey, is that for real?” they’d reply “Would you like to get the goods, or not? Otherwise we have another customer for that shipment.” Crazy!
AC: Did these issues affect the size of your workforce? How many people do you employ now?
SP: No, we have increased the total workforce 16% with 839 new staff in the last year, so now we employ 6,088 people altogether – around 5,000 here in Austria, and 1,000 abroad. Like everyone, we’ve had some problems with recruitment, but we’re doing a little bit better than others because we have on average the highest wages and salaries in the sector. For us, it’s easier to recruit, but it’s still a challenge. Because we also have a leaving rate of 5% or so, which is normal, that means to increase the workforce by 800 people overall I had to find 1100 people in total! That’s a serious problem, but the size of our company and the brand awareness of the product makes it easier to recruit compared to other industries. By the way, about 1,200 employees or 20% of the workforce are engaged in product development!
AC: How many of the 376,000 units you delivered in 2022 were on- or off-road?
SP: 40% was off-road, and 60% street. So, we have three brands, and we are copying what the car industry is doing, like Volkswagen, using the same engine with different covers branded as KTM or Husqvarna or GASGAS. When I first started doing this in 2013, I was concerned about customer reaction, but it’s working just fine. I kept my market share with KTM, and I took overall market share from the Japanese, thanks to the other brands. So, maybe not everyone wants to ride the market leader, but he or she wants to buy a European product, and here the young Spanish brand GASGAS was a big help, because we are pricing it at 8% to 10% cheaper than the equivalent KTM. It’s for the younger riders who don’t have the liquidity from Grandma, but they get the same performance as a KTM, plus the quite different look and brand values. And for the target customer it’s perfect – especially after Sam Sunderland won the Dakar Rally on a GASGAS last year, which gave the brand great credibility with them.
AC: Will GASGAS evolve into an on-road manufacturer?
SP: For sure, yes.
AC: Using the same model platforms as KTM?
SP: It depends – this is a younger audience, remember, but we are only at the starting line. We tried it very fast with the LC4 platform, but maybe that was wrong because we are dominating that segment anyway – it’s our home turf, and in creating more complexity, you’re competing against yourself. But for sure, sooner or later, you will see a street legal GASGAS Supermoto or Naked bike, and this brand will also enter the middleweight twin-cylinder class in the short term, too.
AC: Was this the point of going Moto 3 racing in 2022, and dominating it – it was a rather successful venture, with GASGAS riders 1-2 in the Championship?
SP: Yes, very successful indeed, and now, we push into Moto 2 and MotoGP. The Spanish fans are very happy to have their own brand at the top level.
AC: Why did you choose Aspar to run your Moto 3 and Moto 2 GASGAS teams?
SP: Because we’ve had a long relationship with him, and I would say there are a lot of sharks in the racing world, but he’s one of the serious ones. He’s the rare example of an ex-racer, an ex-World champion, who became good at business. We like him, he’s very reliable, very trustworthy, and he’s also integrated well into our big family – with the three brands. We are running it like a family. Each kid has his own character, but he’s still guided by the parents.
AC: Well, there was a fourth brand in 2022, when CFMOTO did Moto 3 for the first time. Do you see them stepping up a level like GASGAS?
SP: Yes, we convinced them that they should join in to make a greater brand awareness. Moto 3 is the cheapest way of doing this – in Moto 2 it takes time, but it was a help. Now, we are going to start handling their distribution in Europe in 2023, so maybe in two or three years’ time they should start a Moto 2 team.
AC: It seems the relationship between CFMOTO and PIERER Mobility has recently evolved to be much closer than before. Do you now own part of their equity, so are they part of the PIERER Mobility family?
SP: Not completely – we own 49% of the joint venture with them that we set up four years ago, and as our contribution to the equity, we brought in intellectual property relating to design and engineering. If you go to China and bring intellectual property with you, you must put a price tag on it beforehand. Otherwise, you’ll wind up disposing of it anyway, free of charge! The Chinese want to rule the world, so to deal with them and to guide them in a joint venture is a certain challenge.
AC: Which you’ve learnt quite well over the past decade, I think!
SP: Yes, we’re doing our best, but Corona wasn’t a help, because for three years I wasn’t able to visit them and nor could any of my guys, so only now are our first teams going there starting in March. Unfortunately, the flight availability is very limited – air tickets to China went up three times compared with before, but that’s how it works. But it’s getting back to normal, and they made a great job of creating the joint venture hub for our middleweight class of models. The quality of manufacture is extremely high – really, completely on a par with making them in Austria.
AC: Will all future middleweight KTM, Husqvarna, and GASGAS twin-cylinder models be made in China?
SP: That’s the plan – they’ll be made in China, and the premium bikes here in Austria. I distinguish between premium and entry-level middle-class models. The more price competitive models are coming from China, and the premium bikes are coming from here. But I was in India in January, and it seems now even the twin-cylinder bikes can also be made there, which is very helpful.
AC: I thought your future strategy had been for CFMOTO to concentrate on producing twin-cylinder middleweight models, and Bajaj in India the single-cylinder models?
SP: Yes, that was our strategy for a while. But for sure in the next two years, the twins will also be made in India, too.
AC: Will this be the RC490 500cc parallel-twin that you’ve been working on for some years?
SP: No, it’ll be the 790 – why should I reinvent everything from scratch?! Maybe they’ll name it the 690 or whatever like BMW, but that’s not an issue. Chinese products don’t have any chance in India, where they have to have an Indian provenance. If you show up with a Chinese-made model, forget it. The 500 class, for me, is not an interesting category anymore, so we stopped the RC490 because we are bringing the 790 down a little bit. We’re talking about the 690 or 650 – and that’s better for marketing, because more is always better than less! Also, its pricing is always an issue. It’s easier to make a satisfactory price tag with a 650 model compared to a 500. A 500 is an entry-level bike.
AC: So, you’re saying the 790 parallel-twin KTM will be made in India within the next two years?
SP: For sure – we are already starting the discussion on how to achieve this, and with which kind of component supply solution, but it’s coming. We will have the 790 built there for sure, and the Naked bike will be the first one, as usual.
AC: Will these be only for India, or will they be sold in Western markets, too?
SP: The idea is that India takes care of India, Nepal, Sri Lanka, Indonesia – it’s dependent on price sensitivity, as well as geographic proximity.
AC: But for Australia, which is close to both India and China geographically, would such models come from India?
SP: India, yes, for sure India. However, for Asian markets China is ahead because the Chinese guys are so fast – I’m seriously impressed. They are the world champions in copying, but to a high level. Within less than two years we have transferred our entire 790 platform to them with a 100% supply chain in China, and it’s working very well – the quality is excellent. So, we are starting this year to handle CFMOTO’s distribution for the whole of Europe, which is the first step we agreed based on the intellectual transfer of the platform. We are taking care of importation to Europe of all CFMOTO products based on a KTM engine platform.
AC: How about other countries, like North America or Australia?
SP: It depends. Maybe we’ll do Latin America, but we have to discuss it. What’s agreed is that Europe is our home market, so we’ll take care of CFMOTO products made in China with a KTM motor. I think in the future, the real competition in such entry model middleweight levels, comes not anymore from Japan, it’s coming from China. I was in EICMA for just one day last November, and I visited three booths besides ours – CFMOTO, Benelli, and Voge, which is BMW’s joint venture partner. What I have seen there convinces me that this is where the real competition will come from in future in the entry level and middleweight sectors. Fortunately, we have an alliance with one of the three leading such Chinese brands!
AC: I understand CFMOTO has built a new factory in its Hangzhou base to accommodate this expansion?
SP: Yes, it’s our CFMOTO and KTM joint venture plant, with a capacity of around 50,000 units a year, and last year, we already made almost 20,000 despite the old Coronavirus being still there in China. It’s a nice result, and I’m impressed. So now, we’ll speed things up.
AC: CFMoto is reportedly about to launch two large capacity models, a 1000cc V4 superbike, and a 1279cc Super Naked! Are these derived from KTM models – in the case of the V4, from your RC16 MotoGP bike?
SP: The Chinese are very aggressive and very brave, they are world class in copying and announcing new Show models! I don’t know who they were copying with these ideas, but they are nothing to do with us.
AC: But if these models come to market, and it’s possible at least one of them will, will you sell these through your dealerships?
SP: Let’s see how long it takes to get production ready with such models, then we can discuss what to do!
AC: Is it true that a number of KTM models manufactured in India has now passed one million?
SP: Yes, that was the reason that I visited there in January, it was the one million production milestone.
AC: Congratulations – but is your relationship with Bajaj still as strong now as it used to be in light of your growing alliance with CFMOTO?
SP: Between Rajiv Bajaj and me, it’s turned out to be a real friendship. It’s a win-win situation for us both, and if we are both doing good, he’s benefitting and vice versa. Without Bajaj we never would have leveraged overall production to the level that we are at now.
SP: No, Rajiv is now also doing Husqvarna for us, and then for many years he’s been trying to do something with Triumph, which, hopefully, will finally come to market later this year, or next year. They’ve been talking to each other since 2016, and were supposed to be launching their first joint venture model round about now, but it seems, the earliest it will now come is in Autumn this year, because they made some more research and changed the styling, or something.
AC: Is the close relationship between Triumph and Bajaj a problem for you?
SP: No, I like competition, it keeps you alive, keeps you fresh!
AC: It’s competition within an established partnership, though.
SP: Look, I’m doing the same thing with CFMOTO, so it all balances out.
AC: So if Mr. Bajaj ends up taking over control of Triumph, which seems possible, it would be no problem for you?
SP: No, I’ve known for a while that’s his long-term strategy – we’ve discussed it. I’ve been doing so many acquisitions myself lately, but now Rajiv – it’s your turn! You’re the expert on how to manage things with your former ruling nation, not this guy from Austria! So, good luck with that.
AC: Looking at something quite different, is it true that KTM is developing a full-fairing RC890 twin-cylinder sportsbike as a 2024 model?
SP: Yes, it’s true. I think it will be launched around a year and a half from now, as a 2025 model.
AC: Well, given that KTM’s mantra is ‘Ready to Race’, will you go Supersport racing with this bike?
SP: It could happen, but first of all, we must find out if it’s competitive or not, because this is now a horsepower class where the rules are always changing. But finally, if it’s possible, why not?! Because while right now we are focusing on MotoGP, and that’s serious, we do want to come back to the customer racing segment with such bikes. So for example, we were always participating in the 300 Supersport category, and now, we want to come back to that segment more strongly – there were very few KTM’s on the grid in this class last year because we stopped support from the factory. It was just some dealer entries. But for next year, for model year 2024, we are bringing a whole new generation of our joint products from India. All new engines, everything. For sure, there will be an all-new RC390, so get ready!
Interview with KTM’s Stefan Pierer – Part 2
Interview with KTM’s Stefan Pierer – Part 3
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