KTM sheds bicycle brands, loses jobs & shifts R&D to India and China

[The Spin Doctor]

Pierer Mobility, the company behind KTM and their associated brands MV Agusta, Husqvarna and GasGas, are 'disinvesting' themselves of their bicycle brands which include the prestigious manufacturer Felt.

At the same time, it was announced that due to “unfavourable economic conditions in Europe” and a “difficult global economic environment”, Pierer Mobilit are about to move what they refer to as "partial production and certain R&D activities" away from Europe, firstly to China where their partner is CFMOTO, and also to India where they team up with Bajaj Auto. The move also includes cuts of up to 300 jobs in Austria.

I'd be interested to know what's behind it. Mid 2023, they were issuing quite bullish projections and taking workers on!

[Bigjawa]

All about the money, innit, I presume they have confidence that Baja and CFMOTO can design the bikes and screw them together in a reasonable enough fashion that the brands won't be damaged by poor quality.

Not surprised they're looking rid of pushbikes, I think the cycling thing is starting to plateau a bit.

[mangocrazy]

I'd question the wisdom of moving a flagship brand like MV Agusta to production in China. That wouldn't sit well with potential buyers. There's certainly more to this than the press release reveals, so will await further updates with interest.

[Dunxster]

The UK distributor of KTM bicycles, Flo Distribution, closed down a couple of months back.

It's a bad time to be in the cycle trade with numerous distributors going to the wall and the recent announcement by Raleigh that it is dropping its P&A business in the UK.

[The Spin Doctor]

The UK distributor of KTM bicycles, Flo Distribution, closed down a couple of months back.

It's a bad time to be in the cycle trade with numerous distributors going to the wall and the recent announcement by Raleigh that it is dropping its P&A business in the UK.

As far as I can work out, the cycle manufacturers all expanded production on the back of the COVID boom without much consideration as to what would happen when the world returned to normal... sales dropped right back, which seems to have left masses of unsold inventory sitting around being cleared at heavy discounts.

[The Spin Doctor]

All about the money, innit, I presume they have confidence that Baja and CFMOTO can design the bikes and screw them together in a reasonable enough fashion that the brands won't be damaged by poor quality.

Not surprised they're looking rid of pushbikes, I think the cycling thing is starting to plateau a bit.

Well, no worse than the average KTM reliability issues

There are only so many cycles people can buy...

[Hot_Air]

the cycle manufacturers all expanded production on the back of the COVID boom without much consideration as to what would happen when the world returned to normal... sales dropped right back, which seems to have left masses of unsold inventory sitting around

That seems to be the case, plus we’ve got inflation and a cost-of-living crisis.

Also, cycles have become (unaffordably?) expensive. How many people can afford to buy new now? It’s got to be a shrinking market considering the cost-of-living these days.

[mboy]

The UK distributor of KTM bicycles, Flo Distribution, closed down a couple of months back.

It's a bad time to be in the cycle trade with numerous distributors going to the wall and the recent announcement by Raleigh that it is dropping its P&A business in the UK.

There's a fair bit more to the whole story than meets the eye. But yes, ostensibly the cycle trade is in the doldrums right now, as bad if not worse than the motorcycle trade... The good news is that it has recovered before, and it will recover again. Most certainly some brands, distributors and shops will become casualties in the meantime though.

Col who ran FLi Distribution is a personal friend of mine. FLi never really acted as an official distributor for KTM Bikes, and Col would tell you that himself. They acted as an agent for sure, and took a few demo bikes in and handled all the behind the scenes stuff on behalf of KTM in the UK, but KTM's bikes were all shipped directly from Austria...

Before I carry on, it should be noted that KTM Bicycles and KTM Motorcycles are 2 separate entities... The businesses, on opposite sides of the same road no less, were split from each other a long time ago. KTM Motorcycles has since come to acquire other bicycle brands such as Husqvarna and Gasgas, primarily through purchasing their Motorcycle businesses that also incorporated the cycle businesses. KTM were having a big push 12-18 months ago to try and get Gasgas and Husqvarna eMTB's in particular, into some of their existing KTM motorcycle dealerships. Mostly it hasn't taken off as you might expect, though there are perhaps 1 or 2 dealers that have done OK with it to my knowledge.

Anyway... Back to KTM Bicycles...

The long and the short of it for FLi was that Brexit royally fucked things up. As soon as we actually left the EU, suddenly the bike prices were 20% more effectively, so it was becoming increasingly difficult to compete with other brands in most cases, as until that point there had been no VAT due on KTM bikes coming from Austria. Of course FLi knew this was going to happen, and had tried to protect against it by diversifying the business to a degree. Ultimately after 3yrs of selling increasingly less KTM bicycles because of increased costs, FLi and KTM parted ways.

At the same time, Col decided that although he had diversified the business somewhat, the other brands he was looking after hadn't filled enough of a gap, combined with 15yrs of being self employed and actually having some cash in the bank to show for it, he decided to close the business, sell off any remaining stock (I bought quite a lot of cheap MTB rims off him for instance, Reverse Racing was another brand he distributed), and actually go and ride his bike for a bit before worrying too much about the future (his wife is the brains of the duo, I believe she has been training as a criminal psychologist, and after he put her through university he's looking forward to kicking back a bit and being a house husband to a degree I think! ) Certainly he closed the business in the black, unlike so many others... He has had 3 riding holidays in the last 6 months and seems to be generally enjoying life right now! I'm jealous of his facebook feed pics for sure...

KTM Bicycles have been picked up by Greyville Enterprises (https://cyclingindustry.news/greyville- ... ktm-bikes/) some time since... Though I have yet to hear anything further than this press release so far...

As for KTM Motorcycles... To be honest, since they announced their partnership with CFMoto a few years back, it's always been on the cards that they'd be decreasing Austrian output (and jobs) sooner than later as more and more bikes got made in China. I think it's only the LC8 engined bikes that are currently made in Austria now, although I know there is now a Chinese made version of the LC8 engine that goes into a Chinese domestic market only CFMoto bike already, so I guess it won't be long until all of them are made in China potentially.

As for shedding the Gasgas and Husqvarna brands... I haven't heard any confirmation of this at all, though I suspect given the way the bicycle market is at the moment and most bike brands losing money hand over fist due to overstocks and poor supply chain management (a hang up from over egging the pudding during COVID), it wouldn't surprise me if there's some truth in this...

Its tough out there at the moment folks! My Boss (I work in the cycle trade by the way) is already talking of certain other brands and distributors in the past tense even though they still haven't officially wound up yet. It's not just the cycle trade though, I know of one or two big motorbike dealerships that have been on borrowed time for weeks/months now, and when you see brand new bikes being sold at 30%+ off RRP (which is significantly below cost in the motorbike world) just to get rid of them, you see how some of the brands are struggling too right now... Cheap finance deals are back for many manufacturers too, despite bank interest rates being much higher than they were only 15 months ago, which says just how much the manufacturers are having to subsidise new bike sales right now too!

[The Spin Doctor]

Before I carry on, it should be noted that KTM Bicycles and KTM Motorcycles are 2 separate entities... The businesses, on opposite sides of the same road no less, were split from each other a long time ago.

That's why I talked about Pierer Mobility AG - that's the brand behind the brands, as it were.

[mboy]

That's why I talked about Pierer Mobility AG - that's the brand behind the brands, as it were.

For sure... I got that... But 99.9% of people wouldn't as it isn't common knowledge outside of those working directly with the brands to be honest. I sold KTM Bicycles through my shop for years, hundreds of the things. I don't think a single customer knew before buying one that despite the same branding and similar marketing, that KTM bicycles was a different business to KTM motorbikes.

[Hot_Air]

Its tough out there at the moment folks! My Boss (I work in the cycle trade by the way) is already talking of certain other brands and distributors in the past tense even though they still haven't officially wound up yet.

Many places have low stock (limited sizes available) or a lengthy backlog for winter cycle clothing. Do you think the pendulum has swung the other way, and retailers are overcautious with how much stock they buy? Or are manufacturers making smaller production runs?

[Dunxster]

Many places have low stock (limited sizes available) or a lengthy backlog for winter cycle clothing.

This is more a case of bricks and mortar shops realising that clothing can be an elephant in the room and consequently carry much less stock (so that they're not left with out dated stock) or simply dropping it altogether. It's been ongoing for quite a few years now.

The situation has not been helped by the online price shaggers undercutting everyone...

[Hot_Air]

Currently, even the online retailers often have limited stock of many items. I wonder why

On a more positive note, I’ve found some of the bricks-n-mortar shops also have online stores with outstanding online service. They deserve to survive the present downturn and thrive once the economy improves.

[mboy]

Its tough out there at the moment folks! My Boss (I work in the cycle trade by the way) is already talking of certain other brands and distributors in the past tense even though they still haven't officially wound up yet.

Many places have low stock (limited sizes available) or a lengthy backlog for winter cycle clothing. Do you think the pendulum has swung the other way, and retailers are overcautious with how much stock they buy? Or are manufacturers making smaller production runs?

Spot on...

Retailers are on the whole, incredibly cautious right now. Not just with clothing, which as @Dunxster points out above had been happening for a while anyway in typical bricks and mortar stores, leaving it more and more to the online boys. Who consequently have been forced to be a bit more cautious themselves too, or risk a situation like that of CRC/Wiggle right now...

The whole thing is best known as the "bullwhip effect"... https://www.techtarget.com/searcherp/de ... 20a%20whip.

Essentially, what happened during the COVID pandemic was that demand increased in the cycle trade, but nowhere near as much as the industry was led to believe it had... Looking at industry wide figures for 2020/1/2, sales were higher somewhere in the region of 15% across the board for these years compared to what was expected on average. The problem was that only a 15% increase in demand made it much more difficult for everyone to secure the bike or parts that they were after. Customers were phoning various shops to get hold of what they wanted. Shops experienced huge increases in phone and email enquiries (and eventually walk ins too), and incorrectly extrapolated that these were all missed sales, where in fact it was just customer desperation to find bikes and products that were slightly thinner on the ground than had been expected. Coming off the back of a bad 2018 and a terrible 2019 sales wise, 2020 had been expected to be a better year for bike sales anyway but many retailers were still a little cautious with their purchasing prior to the pandemic, and then as soon as the pandemic hit, you had all the cash rich big boys tie up all the stock anyway by sinking their spare capital into it, leaving the little shops even less able to get hold of stuff than usual.

So your typical shop owner was conflating a "mass of missed sales opportunities" and this information was of course being fed to the distributors, who were adding on their usual growth margins too, who were then feeding this information to the bike manufacturers who were adding their growth margins too, and feeding that information onto the OEM component suppliers for their forecasting...

So now you have a situation where in some cases it's still difficult to get hold of some high end Groupset components, but you can buy a full bike with full complete groupset for not a lot more than you can buy the groupset for (if you can actually get it), because the bicycle manufacturers over ordered massively and there is a log jam of stock right now as a result... I'm sure most people know about the 50%+ off deals on Specializeds and various other manufacturers at certain chain stores of late. A totally unsustainable practice, but it's happening nevertheless!

The same applies to most aspects of the cycle trade too, albeit not as bad as with the bicycle manufacturers (who are using components from other manufacturers as part of their OEM build kit remember)... Cycling clothing has always had its seasonality problems as well as the need for too many SKU's (5 or 6 sizes of a product in 3 or 4 different colour options usually, just to be able to sell it)...

It's by no means an exclusive problem to the cycle trade either by the way, it's just that the way so many businesses are run as vanity projects in the cycle trade rather than as viable long term ventures, combined with the poor liquidity of so many businesses that is typical in the industry too, and you are faced with the situation where businesses are going bust left right and centre as they are right now!

The blip won't last indefinitely though... But it is accelerating the process of sorting the wheat from the chaff so to speak!