Royal Enfield and Hero show interest in Ducati

Dieselgate, along with a coordinated move to focus on electric vehicles and other mobility solutions have put the Volkswagen Group in a bit of a cash crunch, which it plans to deal with by holding the corporate version of a yard sale: lay out your less useful possessions and hope for a juicy bid. The first of these, it seems, is Italian bike-maker Ducati.

 

Ducati was acquired by Audi (a VW Group company) in April 2012, a move regarded as poor strategy by analysts and attributed to then VW chairman Ferdinand Piech’s love for Ducati’s engineering and design. Piech has since stepped down, and Ducati might now be on the block.

 

According to Reuters report on this issue, Ducati’s annual earnings before interest, taxes, depreciation and amortisation (EBITDA) is roughly 100 million euros (around Rs 765 crore), leading to a valuation of as much as 1.5 billion euros if a multiple of 15 times its core earnings (similar to that of Ferrari) is applied.

 

The same Reuters report also states, a few Chinese two-wheeler makers and Indian bike maker Hero MotoCorp are interested in purchasing Ducati. Given that the deal works out on a financial level, purchasing Ducati has obvious prestige and technology-transfer benefits for Hero.

 

Hero, after its acquired Eric Buell Racing went under, has no presence in the high-performance, high-capacity segment that Ducati deals in. Acquiring Ducati would help Hero MotoCorp increase its global footprint, not to mention presence in the motorsport space.

 

According to The Times of India (TOI), even Royal Enfield (Eicher Motors) has expressed an interest in making a bid for Ducati. This acquisition might help the Chennai-based bike maker to gain a footing in some of the more developed markets as well as gain more brand strength in the international two-wheeler scene, the report said.

 

Speaking to TOI, Siddhartha Lal, CEO and MD of Eicher Motors, said, “We are today the most profitable motorcycle company in the world... We want to become a global leader in motorcycles, we want to become the No.1 in middle-weight markets around the world... Anything which de-focuses us from our idea, we will not do.”

 

But it’s not just Hero or Royal Enfield that are looking to gain from a merger like this. When speaking to TOI earlier this year, Ducati expressed an interest in developing a partnership in India with the aim of making small-capacity engines. If that sounds far-fetched, you need to look no further than Bajaj KTM to see how entering the small- to mid-capacity streetbike market changed the fortunes of the Austrian bike maker. It would make a lot of sense for Ducati to explore what’s possible in the space and being bought out by a large Indian two-wheeler maker would certainly allow it to do so.

 

Meanwhile, when we asked both Royal Enfield and Hero regarding the possible acquisition of Ducati, both the companies said that there was no official statement regarding a bid to purchase the bike maker at this time. However, neither of the companies flat-out denied the possibility of such a move going forward.