Royal Enfield revving up to buy Ducati?

It's arguably the most iconic brand among high-performance motorcycles. And it could soon be owned by an Indian company. Royal Enfield is understood to have been approached to acquire Italian superbike maker Ducati, owned by Germany's embattled Volkswagen group.

According to reports, VW, reeling under a crippling diesel emissions scandal , has tasked investment banking boutique Evercore to evaluate possible options for a sale of Ducati. The Italian company could fetch a valuation of about $1.5 billion euros, according to estimates.

Royal Enfield, a part of Eicher Motors, has been witnessing healthy growth in India even as it expands aggressively in overseas markets across Europe, North America, and Asia. Sources said that Eicher Motors - which is looking to attain global leadership for Royal Enfield in the middle-engine category - is examining the terms related to the acquisition, possible asking price, and how Ducati could fit within its own fast-growing operations.

Eicher declined to comment. "We can't talk to you on such things," Siddhartha Lal, MD & CEO of Eicher Motors, told TOI when asked about possible acquisition plans for Ducati.

Pressed further, Lal said, "I have a general view on such things. We are always open to thoughts and ideas. But as you know, we are the most focused and selective company... So basically, without saying absolutely no to anything - because we never say never - we are so zeroed in on our own opportunity that we do not want anything to distract us."

However, sources said the Indian two-wheeler major - which has a tie-up with Sweden's Volvo for heavy commercial vehicles and American manufacturer Polaris for personal utility vehicles -- is "keen to explore" any possible acquisition effort for Ducati, "if it comes at the right value and provides the best fit" within its own branding.

Ducati is owned by Volkswagen's premium car division, Audi, and was acquired by the German auto major in 2012 for 860 million Euros. Its current portfolio is dominated mainly by motorcycles powered by engines between 800cc and 1,200cc, a segment which is completely missing in Royal Enfield's portfolio.

Ducati had sales of 593 million Euros in 2016. Other suitors may include global companies such as Suzuki, Honda, Polaris and Harley Davidson, as per reports.

The Italian company sold 55,451 units last year (at a growth of 1.2%), and enjoys a cult branding across the world with a healthy network in many developed markets.

Royal Enfield will hope to gain from Ducati's iconic branding, technology prowess, heavy-bikes portfolio, and a good network in developed markets.

On its part, Eicher Motors has been witnessing one of the best periods in its history with the Royal Enfield brand. Its motorcycle sales grew 31% last fiscal and touched all-time-best sales numbers of 6.66 lakh units against 5 lakh units in 2015-16.

Lal said the company is eyeing "global leadership" in the middle-engine range - from 250cc to 750cc category - as it works on new global platforms beyond its current portfolio of vehicles such as Bullet (350cc and 500cc), Thunderbird (350cc and 500cc), Classic (350cc and 500cc), Himalayan (410cc), and Continental GT (535cc). These are priced between Rs 1.2 lakh and Rs 2.45 lakh (on-road) in Delhi.

"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 number one in middle-weight markets around the world... Anything which de-focuses us from our idea, we will not do," Lal said.

Apart from experiencing robust growth in demand, Royal Enfield's success has also meant that Eicher Motors is in the list of most profitable auto companies. Its reserves at the end of fiscal 2016-17 were over Rs 3,500 crore, growing by nearly Rs 600 crore over the past six months.
The Wolfsburg-headquartered Volkswagen group is considering the sale of Ducati+ as part of an overhaul of its global operations following the diesel emissions scandal that hit its business in September 2015. The company has reportedly set aside $18.2 billion for fines and expenses to fix as many as 11 million cars worldwide.

The possible of Ducati is seen as an effort by the company to divest non-core brands.
A top Ducati official told TOI earlier this year that the company wants to have a partner in India to make small-engine motorcycles. "These thoughts could become a reality in the medium to long term," Andrea Buzzoni, global sales & marketing director for Ducati said in February. "In India, you have robust two-wheeler players, who have competence in terms of engineering, production capacity."