The Indian and American brands are the latest to be in talks for buying Ducati from the dieselgate-stricken Volkswagen Group.
The emission scandal that rocked Volkswagen in September 2015 continues to send shockwaves through the company. The latest development was with Audi and Porsche getting dragged in, with claims that the V6 diesel engines also made use of a cheat device. Dieselgate will cost the company potentially billions of dollars in the form of fines and recall costs.
Given the current situation, that the Volkswagen Group would put a profitable company like Ducati on sale makes sense. The group has made a huge commitment to a cleaner and greener future powered by hybrids and electric cars. As profitable as it may be, a high- performance brand like Ducati who has, to date, showed no indication of working towards sustainable mobility, may not be a perfect fit with the company’s new direction.
There is no official word yet, but news first broke in late April that Hero MotoCorp was among numerous companies in talks to buy Ducati. That was quickly followed by reports that Royal Enfield was also a potential suitor. Now, an article in Reuters talks of Harley-Davidson showing interest in buying the Italian sports bike brand. Interestingly, the article also makes a couple of mentions of Bajaj being a potential buyer. Since these are listed companies, there’s no point in expecting any definitive official statements until a concrete plan is made, but let’s consider the possibilities in either case.
Does it make sense for Bajaj?
We don’t think so, given that Bajaj holds a 49 percent stake in KTM, another European sports bike company that makes motorcycles similar to Ducati. Bajaj has a deep investment the brand, and until the recent opening of a new plant at the Philippines, it was the sole manufacturing hub for small, sub-375cc KTMs in the Duke and RC family. These small bikes have contributed to KTM’s big resurgence over the past few years and have helped it become one of Europe’s biggest brands. KTM is a technological tour de force with a massive presence in multiple forms of racing, including a recent entry into MotoGP. As a source of future technologies, Bajaj needs to look no further and we wonder how much it stands to gain from another company with a similar skill set. We have reached out to Bajaj and are yet to hear from them.
What about Harley-Davidson?
This one seems far more convincing for a number of reasons. First, Harley-Davidson has a history of owning Italian motorcycle manufacturers. In the 1960s, Harley-Davidson bought out 50 percent of an Italian brand called Aermacchi. This company started life in 1912 in the early aviation industry, before beginning to manufacture motorcycles post-World War II. Harley sold off the brand in 1978, sparking the birth of Cagiva, who began operating out of the Aermacchi factory in Varese. Things came around a full circle thirty years later when Harley-Davidson bought MV Agusta (owner of Cagiva at that time). Only a year later, Harley sold its share in the MV Agusta family, for next to nought, back to the Castiglioni family who has owned MV Agusta since then. And, of course, we can’t forget that Harley fully owned Buell motorcycles from 2003 through to 2009.
So, Harley has a history of owning sport bike manufacturers and with good reason. The 114- year-old American brand deeply values its heritage, and cutting-edge technology is not what makes its motorcycles tick. Harley sales have been slowing as its traditional customer base ages and, unlike manufacturers like Triumph, the American company has little to offer those looking for sharper, sportier and angrier motorcycles. A brand like Ducati could fill that void while having little impact on the traditional Harley-Davidson customer base. Having a partner steeped in the latest mechanical and electronic tech can’t hurt as well.
According to the report, Volkswagen is working with an investment banking advisory firm Evercore to work on the sale, while Harley-Davidson has called upon Goldman Sachs to work on its side of the deal. Last year, Ducati earned about 100 million euros before interest, taxes, depreciation and amortisation (EBITDA). Volkswagen is stated to be valuing Ducati at roughly 1.5 billion euros or about 10-15 times its EBITDA value. Tentative bids could reportedly be made as early as July, so we should know more in a month’s time.
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