Pierer Mobility AG is the holding company for KTM AG, the motorcycle manufacturer. Pierer Mobility has other business areas as well, like financing and components manufacturing, but KTM AG is by far the biggest business area for the group. For this analysis, I would frequently interchange KTM and Pierer throughout to keep the flow. For most practical purposes, they are the same.
First, the News from KTM
Last week, KTM announced that it had secured funding from long-time partner and very significant minority shareholder, Bajaj Auto. The funding of EUR 800m means that PIERER Mobility AG and KTM AG would be able to serve the quotas in the KTM restructuring proceedings, and the restructuring plan quotas of KTM AG, KTM Components GmbH, and KTM Forschungs & Entwicklungs GmbH will be fulfilled in time.
India-based Bajaj Auto provided the funds to KTM / Pierer through its international arm, Bajaj Auto International Holdings B.V. The funds are part of the quota payment to the creditors in furtherance of KTM’s debt restructuring. Bajaj (using its USD 1.9bn cash reserve, strong balance sheet) helped secure a loan in the amount of EUR 450 million to KTM AG and an additional amount of EUR 150 million to PIERER Mobility AG, which passes on the required balance to meet the quota payments to the KTM companies.
Bajaj, through its exchange filings in India, has informed that it has raised EUR 666 million in debt for Bajaj International BV from Standard Chartered, JP Morgan Chase, DBS Bank, and Citigroup Global Markets.
Stefan Pierer is Gone
Pierer Mobility also announced that Stefan Pierer will step down from the Executive Board of PIERER Mobility AG in June 2025 after the conclusion of the restructuring proceedings. The Board is appointing Verena Schneglberger-Grossmann, who has been with the group since November 2015, as a new member of the Executive Board (Chief Legal Officer) of PIERER Mobility AG, supporting the CEO Gottfried Neumeister.
Bajaj Auto is in Control
In a separate release, Pierer Mobility informed that Pierer Industrie AG, which holds a 50.1% stake in Pierer Bajaj AG, which in turn holds a 74.9% stake in Pierer Mobility (I know, it’s confusing, and we have a flow diagram for you), has concluded a call option agreement with Bajaj BV, which enables Bajaj BV to acquire the shares of Pierer Industrie AG in Pierer Bajaj AG and thus indirect control over PIERER Mobility AG until the end of May 2026.
In short, Bajaj is taking over KTM.
Bajaj’s First Save was in 2007
Bajaj first saved KTM in 2007. At that time, Bajaj was a cash-rich (always has been since the ICE age) Indian company with a small, yet growing, identity outside India. KTM was a quintessential European motorcycle brand – loads of passion, an immaculate history, and no financial capabilities to build on it.
Bajaj put in money and took a 14.5% stake. Over the years, the Indian kept on investing and increasing its stake, which had reached nearly 49% by 2020. Bajaj’s stakeholding was never direct. In the corporate structure, KTM is owned by Pierer Mobility AG, an entity listed on the Wiener Börse (Vienna Stock Exchange). Pierer Mobility AG is controlled (74.9% ownership) by Pierer Bajaj AG, in which Bajaj has a 49.9% stake through its Netherlands-based arm, Bajaj Auto International Holdings BV. Pierer Industrie AG has a 50.1% stake in the entity.
The complex holding structure meant that Bajaj was a very strong minority shareholder, just a whisker away from a controlling stake. However, the Indian company stayed out of active management of KTM. Bajaj Auto had two members on the board of Pierer Mobility, including Rajiv Bajaj, who served as the Deputy Chairman of the Supervisory Board.
A Relationship Beyond Equity
Apart from investment and equity, the relationship went deep into the more practical business areas – Bajaj and KTM co-developed single-cylinder motorcycles for emerging markets and the beginner’s license segment in developed markets. This resulted in a wide range of products, ranging from 125cc to 400cc, that would be sold under the KTM and Husqvarna brands.
In the KTM annals, the impact of the Bajaj-KTM products is often underestimated. Before the smaller Dukes came around, KTM’s entry-level street bike was the Duke 690, hardly an entry-level motorcycle. With the newly developed Duke family (125, 200, 250, and 390 models), KTM could target the beginner license segment and also enter high-volume markets like India, ASEAN, and Latin America.
For Bajaj, this was a multi-pronged relationship. The Indian company invested in KTM, co-developed motorcycles, and also produced all non-Chinese-market KTM single-cylinder street bikes. The Indian manufacturer became the global export hub for the Austrian brand. Bajaj would also re-tune the engines and use them in its own street bikes.
There were other mutually beneficial bits as well – Bajaj was the KTM retailer in India and Indonesia, two of the biggest two-wheeler markets in the world. KTM also owned 49% of the famed design studio KISKA, and Bajaj has used its services for some of their models and communication.
Focus on Profitability…till 2022
Bajaj knows how to make motorcycles very profitably. As of the FY 24 annual report, the company makes more than 17% net profit margin. So when Bajaj started co-developing with KTM, it was expected that the focus would be on making lots of motorcycles in a way that engineering efforts are optimised and profitability is maximised. The focus was on component sharing. The result is unprecedented parts commonality – about thirteen motorcycles across KTM and Husqvarna brands shared the same main-frame, the first generation of 125cc-373cc engines shared a common architecture, and there was parts commonality all over.
The reward was substantial for both partners, but more so for KTM. Sales doubled – in 2024, nearly 120k of KTM’s 292k sales were motorcycles made by Bajaj. Importantly, these were very profitable sales – parts commonality, optimised development costs as they were developed in India, and low manufacturing costs due to Bajaj controlling things.
For the Indian manufacturer, it meant developing more motorcycles, providing quick and immense exposure to its engineering team, and learning things in a short time that any brand is expected to spend years to learn. Additionally, every KTM motorcycle manufactured guaranteed high production margins for Bajaj. The engineering exposure, the engine family development, and delivering up to European quality standards allowed Bajaj to form a similar (but non-equity) arrangement with Triumph.
The Triumph 400s have been developed by Bajaj-Triumph, and there is a remarkable similarity between the Duke 390 and the Triumph 400 engines. The origins are the same, also shared with multiple other Bajaj motorcycles. Manufacturing for KTM/Husqvarna, and later on Triumph, has improved Bajaj’s quality levels, in turn improving its international business.
In a nutshell, this has been a very fruitful relationship for everyone.
Yet, since 2007 to till a few weeks back, Bajaj had been content in being a significant minority shareholder in KTM. It has never tried to acquire KTM, always happy with Stefan Pierer’s leadership. Or maybe it did, and was dissuaded.
However, things have sharply declined for KTM in the last few months, and Bajaj’s present interference was expected and anticipated.
Over the years, KTM has fostered another relationship, this time in China, with CF Moto. Both have an equity JV, CFMoto-KTMR2R, in China, in which KTM owns 49% and the Chinese partner holds a 51% stake.
Under the joint venture, CF Moto manufactures all twin-cylinder models in the 690/790/890 series for KTM. That way, they are the global production hub for these models. CF Moto also makes the 200 and 390 Duke models for the Chinese market.
Beyond that, the Chinese manufacturer has taken the KTM engines and developed its own motorcycles, which were sold only in China initially, but are also on offer in some other markets.
The agreement also extended to KTM distributing CF Moto (and Zeeho, CF’s electric brand) in Europe, giving CF Moto a strong toehold in the European market.
With Bajaj’s inputs and the sub-400cc models that Bajaj-KTM co-developed, global sales took off. The peak sales were in 2023, though we say that 2022 was actually KTM’s best year.
The 2024-25 crisis that led to this
The present crisis came into public view on 26th November 2024 when KTM issued a press statement announcing voluntary judicial restructuring. The crisis was brewing under the surface for some time before that.
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The writing had been on the wall for the previous few weeks since Pierer announced its half-yearly results. To say they were bad is an understatement—sales fell off a cliff, and Pierer said KTM would cancel the 2024 guidance. They said that the market conditions in North America and Europe remained weak. They also fired most of the executive board, reducing it to two: Stefan Pierer and Gottfried Neumeister.
All this coming just a few quarters after 2022, Pierer Mobility’s best year ever, was a shock. In 2022, revenues had crossed EUR 2.4bn, Pierer Mobility hit an all-time EBITDA high of EUR 381m, and reported EUR 171m in net profits, operating at a healthy 7.0 percent net margin. The company even paid dividends.
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However, the warning signs were there. 2022 was the year Pierer Mobility’s free cash flow dipped marginally into negative territory. This was due to escalating working capital requirements. Not many noticed, as this was a marginal blip.
Then, in 2023, things started going wrong; we can see that now because we analyze this with the benefit of hindsight. Revenues were still growing in 2023—the best revenue year ever at EUR 2.66bn. EBITDA dipped by 15 percent to EUR 324m. However, the biggest red flag was the dip in net profits. At EUR 76m, they had collapsed by 55 percent.
But the killer was the working capital requirement that shot up, starting in 2023 and continuing in 2024, and 2025.
Why?
The working capital shooting up drastically with free cash flows declining simultaneously was the train wreck that one day would be a case study in business schools.
To understand that, let us first look at KTM’s sales performance.
Sales Declined Drastically
KTM reported wholesales of 381,555 units in 2023. This was an improvement of 6063 units over 2022 sales, but only a 1.6 percent improvement.
But then sales dropped drastically in 2024. In H1 2024, KTM could sell only 147,496 motorcycles, 21 percent down year-on-year from 187,158 motorcycles sold in H1 2023.
But why did sales decline? Pierer Mobility said the market is bad, which was not completely true. KTM-Husqvarna-MV Agusta-GasGas had lost significant market share while the competition is doing way better.
To put it in perspective, Triumph sales are booming thanks to the new 400s; Ducati is down somewhat, though nowhere comparable to KTM; and BMW Motorrad had record sales in 2023 and is holding steady at that level in 2024.
The comparison between the Triumph and KTM is more apt. If Triumph sales are booming thanks to the Bajaj-made 400 range, KTM (and Husqvarna) have also enjoyed having the widest single-cylinder (125-400cc) range in the European and North American markets, all manufactured by Bajaj.
It Started with Camshafts
In the case of KTM, the camshafts on the 790/890 series LC8C engine failed, at times, within 20k km of use. CF Moto in China assembles the engine and the 790/890 motorcycles. However, KTM was responsible for ensuring quality. The impact of quality issues started hurting badly. No one wants a large lifestyle motorcycle with a problematic engine—replacement components are expensive.
KTM further worsened the situation by not promptly addressing the quality issues, antagonizing customers. As customers walked away, resale prices plummeted, putting KTM in a vicious cycle. People don’t buy large, lifestyle motorcycles that depreciate fast.
When the European and North American motorcycle markets came off the highs in 2024, KTM was the worst affected.
A Domino Effect Triggered
This sales slowdown should have resulted in a corresponding cut in production. However, that did not happen. Maybe the slowdown was shockingly sudden, and the production planning did not get ample warning.
For whatever reason, inventory kept piling up at the dealer and factory ends. At the end of 2023, KTM had EUR 857m in inventory at the factory and dealers combined. That represents more than four months of sales. Large two-wheeler manufacturers try to keep inventory levels at two months. Modest-size lifestyle motorcycle manufacturers are expected to be sharper.
Suppliers also did not slow down production. In all fairness, Pierer Mobility supported the dealers and suppliers by increasing working capital, believing in its strong balance sheet.
Debt piled up.
Debt climbed sharply from EUR 190m in 2021 to EUR 776m at the end of 2023, thanks to a significant increase in working capital.
The situation would further worsen in H1 2024 as Free Cash Flow continued to collapse forcing the situation that started in November 2024.
It does not help that recent trophy spending like that on MV Agusta and on a MotoGP team did
Since then, we have frequently covered KTM’s ongoing problems.
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Problems were bigger than the Early Estimates
Within a couple of weeks of KTM coming out of the closet with its problems, German publication Der Standard reported, citing court documents, that KTM has an unsold inventory of 265,000 motorcycles. That’s a year’s sales worth of inventory in common man speak. Der Standard also raised the debt estimates to EUR 1.8bn (from EUR 1.5bn in Pierer Mobility’s H1 2024 report).
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They Replaced the Chairman
Then, in January 2025, Pierer Mobility AG replaced Josef Blazicek as the Chairman of the Supervisory Board, with Stephan Zöchling taking over. They said Zöchling is an expert in restructuring.
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Finally, A Restructuring Plan
Then, in February, Pierer Mobility announced that creditors had accepted a restructuring plan submitted by KTM AG. The plan provides creditors with a cash quota of 30% of their claims as a one-off payment.
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Yikes!!
That’s a 70% haircut. It may look good or ugly depending on the way you look at it. Getting 30% back is good if you consider that splitting KTM and selling off everything in a fire sale would have netted a fraction of that.
It’s ugly when you realise that this was not a high returns promised software startup where you wrote a check with the knowledge that there was at best a 5% chance of success. KTM was not a start-up. It was a well-oiled manufacturing operation with a tremendous brand name that, in its best year, was netting 7% profits and distributing dividends. For it to go from soaring to squealing the way it did would need a ton of bad judgment married to huge bad luck and a special planetary alignment.
In a country like India, this would have been a political storm.
Still, KTM needed to pay EUR 548 million to creditors and more money to restart operations. Money, it didn’t have.
Bajaj Taking Over and What it Means?
As mentioned earlier, Bajaj has always been a significant shareholder in KTM and a big part of the overall story. Now, the Indian manufacturer is taking over Pierer Mobility completely. It is too early in the day to announce management changes, but they will come.
Obviously, everyone in Mattighofen and Pune would be very busy right now in working out a proper restructuring plan for KTM and restoring it to where it was. Doing that would need profound changes and we see a lot of things happening.
Relook at the CF Moto Relationship
CF Moto and KTM had a good relationship going, as theoretically it provided KTM with a manufacturing and sales toehold in China.
However, beyond that, this was a relationship where, apart from low-cost Chinese manufacturing for KTM, not much was working for the Austrian brand. It gives CF Moto access to technology – CF built its twin-cylinder range of models, like the 800MT and 1250 TR-G. These models have established the CF Moto brand in Europe and other international markets. Knowing how the Chinese eventually muscle past their collaborators, CF Moto’s rise is expected to hurt KTM the most, considering how the motorcycles are placed and the CF Moto technology base that traces its roots to KTM.
Even CF Moto’s China range of single-cylinder motorcycles owes its origins to KTM. Some, like the 250NK, have a strong resemblance to equivalent Duke models. It helped CF Moto that many of its leading motorcycles have also been designed by KISKA, KTM’s in-house, yet independent, design house.
When KTMs troubles started, it was anticipated that CF Moto would also step in to save the JV partner. That was never a logical expectation – Bajaj was a near 50% owner in Pierer Mobility (KTM) while CF Moto owned only 2%. KTM may have been sweet wth both partners, but that does not translate into both of them being sweet with each other. Also, if CF Moto had to muscle in to control KTM, there was no way they could have done that without buying stock from Bajaj. The Indian manufacturer did not need to talk to the Chinese.
With Bajaj taking over KTM’s management, it is not if but when CF Moto will be marginalised in the relationship. The opening salvo has already been fired, with KTM no longer distributing CF Moto and Zeeho products in China.
We don’t expect the China relationship to be discontinued in the near future, as KTM is a minority equity holder in the Chinese venture. However, moving non-China market production to Bajaj in India over the next few years should not be ruled out.
Also, remember that the camshafts that started KTM’s present crisis were manufactured in CF Moto factories. The engines and the motorcycles affected all came from China.
A New Mindset
What makes Bajaj Auto formidable is that it is among the largest two-wheeler manufacturers in the world. It is also the most valued, with a market cap of USD 30 billion. It is also the most profitable with the best net profit margin. In FY 2024, Bajaj had a net profit of INR 74.79bn (USD 879 million) at a net profit margin of 17.2%.
Compare this to KTM, which in its best year had net margins of 7 percent.
Now that KTM is effectively a part of Bajaj, the Indian manufacturer would want the margins to go up. It reflects poorly on Bajaj’s overall balance sheet if they have one ‘prestigious’ part of the group lagging behind.
Did Bajaj Really want to acquire KTM?
Bajaj has been a big part of the KTM mix since 2007. However, the Indian manufacturer never made a serious move to acquire KTM. Part of the reason was Stefan Pierer, the owner of Pierer Mobility AG. Stefan had steered KTM through tough times to build it to the present-day KTM. Before the 2024 crisis, Pierer had not taken a wrong step.
However, the situation was tough. When things started unfolding in November 2024, Bajaj did not make a quick move. Considering Rajiv Bajaj is the Deputy Chairman of the Supervisory Board and probably the sharpest two-wheeler manufacturer, it is unlikely that he did not see the fault-lines emerging even before that.
Interestingly, Bajaj and his company did not act with any urgency to take control of the ship. Instead, in the first few weeks, it was expected that KTM would fend for itself. The current bailout also happened less than 72 hours before the deadline.
But what if Bajaj had not bailed out KTM? The other option was liquidation – taking apart the ship and selling it in bits and pieces. Media reports suggested that BMW Motorrad was at the door to pick up the pieces. That would have been messy and time-consuming, and Bajaj would have lost big in that case.
So, the Indian manufacturer probably made a last-minute move to take control of the ship. The 70% haircut on the debt also made KTM very attractive. The debt on KTM’s balance sheet has been pared down to manageable levels. The company has a potent product pipeline, and a liquidity injection at this juncture would help.
What happens to Electric Programs?
Bajaj has been selling the Chetak electric scooter in India since 2020. It is among the top-three electric two-wheelers in the Indian market. It’s a competent scooter with Vespa-esque classic looks. With a fixed battery and 48V architecture, and premium finishes, it’s not the best product for the delivery market in Europe.
However, there is always a possibility of sharing components and architecture. At one point, as per media reports, Bajaj and KTM did explore the possibility. KTM and Husqvarna had revealed multiple electric concepts in 2021. These included the e-Pilen motorcycle and the Vektorr scooter.
However, even after multiple test mules were spotted, the electric range was never launched. Meanwhile, KTM started retailing CF Moto’s Zeeho range of electric scooters and motorcycles in Europe.
With Zeeho now out of the equation, we can see greater urgency and collaboration between Bajaj and KTM to develop an electric range for the global markets.
