[RahulNagaraj]

According to reports, KTM, which is currently amidst a severe financial crisis has managed to garner a massive inventory of unsold motorcycles.

A report from a German publication states that the brand has accumulated around 265,000 unsold motorcycles - equivalent to an entire year's worth of global sales. The report states that the massive accumulation of unsold inventory stems from several miscalculations in production strategy.



The German publication stated that despite the early signs of slowing demand, the brand continued its high-volume production from the previous year - resulting in excessive inventory. It further mentions that between January 2024 to October 2024, the storage costs of the excess inventory created a massive liquidity requirement of 440 million euros.

Amidst the financial troubles, KTM's parent company, Pierer Mobility AG, recently decided to drop its majority stake at MV Agusta.

Source: RideApart

Link to Team-BHP news

[Senotrius]

They've started to offer those big bikes, excess inventory, here in India. Why not go gung ho, and offer it at massive discounts here. Flood the market here, however small it may be. They're losing money anyways. Better to Get rid of the inventory. The 890 series at 7lakh ex showroom would be tempting (It's 14lakh). KTM's are priced higher nowadays as such. I see more Scrambler400x than Duke 390s on the road.

[rishi.roger]

Wow! That's severe miscalculation on their management part. They actually managed to add this as a blunder to ongoing tragedy and failures, eh.
Indian market is an excellent dumping ground for many, however in this case most of the inventory I assume is for twin-cylinder 500cc+ models that have little scope in Indian market from profitability perspective. It'd not make financial sense if they discount and dump them here.

[abhisheksahas]

Originally Posted by Senotrius

They've started to offer those big bikes, excess inventory, here in India. Why not go gung ho, and offer it at massive discounts here. Flood the market here, however small it may be. They're losing money anyways. Better to Get rid of the inventory. The 890 series at 7lakh ex showroom would be tempting (It's 14lakh). KTM's are priced higher nowadays as such. I see more Scrambler400x than Duke 390s on the road.

While I agree with your statement, I think KTM might have reasons for that:

1. The news article is likely for the brand at the global level and doesn't represent their performance in India.

2. If the product is not competitive (in its segment) enough, price corrections cannot solve the problem.

3. KTM's profit per bike is approximately Rs 22,000. Selling below the cost price isn't helping their cause.

4. Sometimes significant reduction in price drops will raise questions in the minds of potential buyers, and this in turn could mean lesser margin on the existing poor sales.

5. KTM is currently trying to woo a potential buyer to bail them out, and the value of the company could also be linked to the value of the unsold inventory. Investors also look at profit margins during valuations.


These represent only some of the speculated few reasons.

Importantly, KTM's products haven't significantly changed over the last decade - its been more of a cosmetic / performance improvements every year, doing just enough to keep their products updated, the only new category they have added is the adventure range of products.

[adi.mariner]

This is adding to KTMs woes. They should have a flash sale like Amazon or Flipkart but at heavily discounted prices. All the inventory would be cleared in a little while.

[IP_Man]

No wonder. When you go to KTM showroom, no test ride bike is available. If it is available, it is in very poorly maintained condition with lot of vibrations and shocking brakes not operating properly.

I was denied of test drive outside of showroom only because test ride bike brakes were not operating properly, hence it was dangerous to drive on the road. Sometimes one test ride bike is shared between two KTM showrooms.

[BullettuPaandi]

Being Indian myself, I can relate with the responses here. Who wouldn't want discounts? But we need to keep in mind that, bikes are no brinjals; they don't rot by the hour. And how would they even go about transporting and 'dumping' worldwide stock in India- a place known for its Dubai-esque lack of income tax and affluent people with peculiar interest in opulent motorcycles (Hero Splendor remains India’s best-selling 2-wheeler in 2024)?

KTM is not bankrupt because of 'unsold motorcycles'. Just dropping the MV Agusta stake, will help them meet about half of the liquidity requirement, which is definitely not the first thing in their mind now, in the first place. Because they screwed up in a lot of different ways, which the article largely skipped because, I guess, it's all rather boring and won't get readers excited about discounts. Quoting (and underlining highlights) from the original German article that this article comments on (translated by Google):

KTM continues, investors offer up to 700 million euros

The insolvency court has decided that the restructuring proceedings may continue. Offers from investors are to be on the table by mid-January, 300 employees instead of 500 employees are to be dismissed as previously planned. The pressure on KTM boss Pierer is growing

[...]

High investment on Pump

In addition [to the inventory build-up], investments have been made in the past two years, for example for the financing of Pierer New Mobility GmbH, where the bicycle business is located; there were 370 million euros. In addition, the majority of the Italian MV Agusta were acquired, as there were 220 million euros, and around EUR 575 million went to KTM AG's fixed assets. However, the result could not cover all this, but rather had used debt capital for it; as reported, this increased from EUR 255 million (January 2023) to 1.7 billion euros at the end of October of this year.
Vogl cited, among other things, the financing system, which suffered negatively from cash flow if unit sales fall. To this end, there were losses in affiliated companies, large research and development expenses and the increasing demand for debt.

[...]

The production ban has already been determined, which should be at least until the end of February; a reduction in working hours to 30 hours per week and other cost-cutting programs are planned, the motorcycles in stock are to be sold off. What is planned in the longer term: about lower material costs, new supply contracts, increased procurement of materials from outside the EU.

Further insolvency proceedings threat

The mass administrator expects a number of events to be insolvent longer, the mass administrator expects a number of consequences in the group, which results, among other things, from the fact that KTM AG will no longer pay any claims internally. Restructuring procedures are also planned for the companies concerned.
According to the insolvency administrator, fresh capital from outside is required to ensure that the restructuring plan is to be fulfilled in the recovery plan, which KTM wants to raise with strategic investors and/or financial investors as reported to strategic investors and/or financial investors. The offers or the offer for the entry should be fixed by the second half of January. Vogl assumes that the entry will be folded, which is why he considers the renovation plan to be fulfilled.

Financial plan can be adhered to

And can the company afford to continue until the planned entry of investors? In the short term, the company has enough liquidity, said the mass manager, for the announced payment of the December salaries, the abs. In the meantime, a standstill agreement has been concluded with the banks and the three sales subsidiaries, and a property is currently being sold, which is to be sold, which will be shut down around EUR 35 million into the cash deserts. In any case, the financial plan can be adhered to.
The fate of KTM AG now depends on the entry of investors. According to the insolvency administrator's report, there are three declarations of intent, two of strategic and one from a financial investor. They are obviously willing to loosen up to 700 million euros for their entry. The name is known from one of the three interested parties: It is the Indian partner of KTM AG, Bajaj, the second largest motorcycle manufacturer in India.

TL;DR: Production halted; stock to be sold off. Most likely, Bajaj has got KTM covered.

[Turbanator]

Originally Posted by BullettuPaandi

Being Indian myself, I can relate with the responses here. But we need to keep in mind that, bikes are no brinjals; they don't rot by the hour.

There’s nothing Indian about asking for discounts. Manufacturers often sell at discounts or incur losses when inventories exceed a certain period.

If a company has a 12-month inventory, how long can they produce newer bikes, and why?

The first step is to eliminate inventory. Losses can be offset by taxes from current and future profits. Thereafter, they should stop producing models that cannot be sold for a profit.

[anjan_c2007]

KTM had a splendid presence in our markets while quite a few of these bikes were a common in police stations either owing to traffic accidents or for flouting traffic rules. Since about 5 years newer KTM bikes on our roads are difficult to spot. Today's buyers are looking for alternatives.

As reported, investors with deep pockets ( or moneybags) are interested to infuse € 700 million to overcome KTM's woes and among these are Bajaj Auto of India. Let's hope that the adrenalin with Bajaj as an investor with the bailout offer does not do a Ssangyong for the two wheeler giant. Yes, Mahindra jumped and also leaped to acquire Ssangyong but soon found it to be an albatross around its neck.

[Cresterk]

Originally Posted by Senotrius

They've started to offer those big bikes, excess inventory, here in India. Why not go gung ho, and offer it at massive discounts here. Flood the market here, however small it may be. They're losing money anyways. Better to Get rid of the inventory. The 890 series at 7lakh ex showroom would be tempting (It's 14lakh). KTM's are priced higher nowadays as such. I see more Scrambler400x than Duke 390s on the road.

It's a fantastic idea but you also have to take into consideration the customs duty to be paid on CBU imports. It's not a very attractive idea to spend even more money on shipping costs + pay taxes to the govt all just to offer it at a massive discount at the end.

The exception would be if they already have quite a lot of import credits built up from their exports.

Our socialist era customs duty is built around fears (whether justified or unjustified) of becoming a dumping ground for unsold goods from abroad.

[Mr.Ogre]

One of the reason KTM is in this situation is because of the QC issues on their bikes. Most mechanics here advice to stay away from KTMs if peace of mind is what you want with a motorbike. Around 2013 when I was in India I was looking to buy Ninja 300. KTM had newly launched Duke 390 and it was almost half the price of what Ninja 300 was retailing back then. I had years of experience owning Bajaj Pulsars and KTM Duke 200 before that, and I was just fed up of constant issues with their bikes. Not that they would break down completely, but the constant niggles and the need to maintain that rapport with the service center so that your issues are fixed on a priority was just too much.

Owning Yamaha's and Kawasaki's R15, R3, R1 and Ninja's even today has been surreal. High time manufacturers prioritised quality. Ducati's and BMW's did that with their brand and are reaping the benefits.

[BullettuPaandi]

Originally Posted by Turbanator

Manufacturers often sell at discounts or incur losses when inventories exceed a certain period.

It is my understanding that the 2.65L motorcycles never left KTM factories, and are perhaps even in different stages of assembled- 'KTM has 2.65L worth of motorcycles that can't be dispatched' would be a more befitting title as per my understanding. As sales from an OEM usually means dispatches to the dealerships, and not deliveries to the end customers. I can't see how this would reduce the bikes value- sure a year down the line, customers will still be buying bikes that were manufactured nearly a year ago, but as there won't be 'later manufactured bikes' from KTM, the old bikes value will still largely remain the same, given that they managed to cave in for insolvency barely in time and the repercussions are looking to be short-termed.

If you're picturing 2.65L of motorcycles worldwide collecting dust at the dealerships, I don't think that is the case here. Because, such excess inventory at dealerships- to this extent at that- almost never happens. Only way I can see such happening is by 'channel stuffing'- forcing dealerships to buy product beyond their capabilities of selling, to (fraudulently) show "sales" figures to stakeholders/investors. I can see how this would reduce the value of the bikes. Had this been the case- it perhaps would've been the largest 'channel stuffing' in the history, and- KTM would now have been in much bigger trouble with alarmed investors and probably even facing litigation for fraud.

But what happened here is, in my opinion so much more dumber, that KTM seemingly didn't even care about the supply chain. They have failed to notice the lower demand and reduce production accordingly, so much so that their factories are basically done the year now. The German article brought this up only to put the severity of 'several management errors' to perspective. KTM seems to have been too busy with their way too many subsidiaries, investing on developing technologies that nobody really asked for, etc.; all on loan, while also being lethargic about sales. This is the first I come across an OEM whose too much production was an oversight!

Originally Posted by Turbanator

If a company has a 12-month inventory, how long can they produce newer bikes, and why?

The first step is to eliminate inventory. Losses can be offset by taxes from current and future profits. Thereafter, they should stop producing models that cannot be sold for a profit.

They've already halted production; they're not producing newer bikes (for a while).

It is hard to get a hold of this simply because how unconscionable KTM's other 'management errors' are, but this inventory issue is probably the last in KTM's 'issues-to-solve' list. I think it is safe to say that the current 'pickle' that KTM has gotten themselves into, doesn't warrant a resort to 'dumping at discounts to Indians'.

We all are aware of 'Bajaj's scale of economy'; if they are willing to pitch in with up to 700 million EUR, surely they have other ways around this. It is not as if KTMs bikes are not sought after; why would this be headline that "news" articles make out of reports? KTM just showed an utter, and I think unprecedented, disregard to demand- amongst other gargantuan screw-ups- and prepared for too much supply (that they technically still haven't increased yet).

The unfortunate truth is, KTM's management still got away with this and not nearly as affected as those that got laid-off, those didn't get compensated well for Christmas, those that'll still be affected for the foreseeable future, due to various cost-cutting measures that KTM is about to undertake, etc. That is the only real damage here.

[IP_Man]

Originally Posted by Turbanator

There’s nothing Indian about asking for discounts. Manufacturers often sell at discounts or incur losses when inventories exceed a certain period.

Completely agree. Piling inventory is NOT asset but liability and it has 'inventory carrying cost' associated with it.

[ksmrsm]

Originally Posted by RahulNagaraj

According to reports, KTM, which is currently amidst a severe financial crisis has managed to garner a massive inventory of unsold motorcycles.

A report from a German publication states that the brand has accumulated around 265,000 unsold motorcycles - equivalent to an entire year's worth of global sales.

Originally Posted by BullettuPaandi

Most likely, Bajaj has got KTM covered.[/b]

I have information from a little birdie that Bajaj has in fact bought the entire unsold inventory and will be selling it in India. Not a 100% sure about the pricing.

[CrAzY dRiVeR]

Originally Posted by ksmrsm

I have information from a little birdie that Bajaj has in fact bought the entire unsold inventory and will be selling it in India. Not a 100% sure about the pricing.

Very very very unlikely, considering that the big bike market in India is only about 4000-5000 units per year. 2.65L units will need a few dozen decades to dispose in India

KTM's unsold inventory are all primarily their big bikes.