For decades, KTM has been the choice of many orange-blooded motorcyclists with a need for speed both on the road and on the dirt. But things haven’t been going so well for the Austrian manufacturer and now, it’s reorganizing in an effort to stave off bankruptcy. Here’s what’s happening with a world-famous builder in the troubled seas that is the powersports industry right now.
Sales of motorcycles in the United States have been pretty limp since the Great Recession. In 2006, 1.2 million new motorcycles found a home in the United States. Another 1.1 million units rode home the year later. Then the nation’s economy spiraled out of control. Motorcycle sales fell into a trough, where just 439,700 units were sold in 2010. But here’s the kicker, while other recreational products like RVs shot up in demand, motorcycles stayed flat, hanging around roughly 500,000 units sold each year ever since. Sales have never rebounded to the levels seen before the Great Recession.
What’s even more impressive is when you find out that motorcycles didn’t even ramp up much for the pandemic. Just 550,000 motorcycles were sold in America in 2021, the same period when the RV industry hit an all-time sales record and people were buying boats and side-by-sides like they were about to go out of style.
Things have been better in Europe, Bloomberg reports, where sales have recovered to about 80 percent of what they were before 2008. But yep, those numbers suggest people aren’t buying new bikes in Europe like they used to.
With that being said, sales get fascinating when you look at them by category. Motorcycles in the various off-road segments have taken off while cruisers have largely stayed their course. This is part of why you see everyone making an off-road bike from the Harley-Davidson Pan America to Honda’s wacky adventure scooters.
Riding High
According to Motorcycle.com, things were great for KTM for a while. The company started in 1934 as a metalworking shop in Austria founded by Hans Trunkenpolz. It was then KTM got its first name: Kraftfahrzeuge Trunkenpolz Mattighofen. KTM didn’t begin production of its first motorcycle, the R100, until 1951. Then, two years later, the company’s name would change to Kronreif, Trunkenpolz, Mattighofen and some 20 people assembled three motorcycles a day.
Over time, KTM grew in size and scope, making everything from bicycles and motorcycles to radiators. But by 1991, the company fell flat and ended up in bankruptcy. The company was split into four separate entities and rescued by Stefan Pierer and other investors. KTM continued to operate and produce some legendary motorcycles including the Duke series, but internally, the company would undergo a series of restructurings and Bajaj Auto of India would take an interest in KTM beginning in 2007.
So, the company’s been through a wild ride, but things were looking good until recently. In 2023, the company reported a record $2.78 billion in revenue and it managed to sell some 381,555 motorcycles plus another 157,358 bicycles and e-bikes globally. KTM’s owner currently claims to be the largest manufacturer of motorcycles in Europe. What was also impressive was the fact that KTM had 6,184 employees, 21 percent of which were in the company’s engineering department. This is why KTM has been able to brag about new advancements like automated-manual transmissions and the the weird X-Bow sports car.
How good were things at KTM? In 2013, it started a joint venture with CFMoto in China where CFMoto would use a facility in China to build both KTMs and CFMotos. Meanwhile, KTM used its resources to distribute CFMotos outside of China. The partnership was seen as a great venture for both companies as it helped KTM penetrate into the important Chinese market while CFMoto got to dig deeper into Europe.
This venture bore fruit for CFMoto in 2020 as it introduced new powerful motorcycles featuring KTM’s technology. Later, both companies were celebrating such great success that Chinese production of CFMotos and KTMs was set to double. Things looked so good that in early 2024, Pierer Mobility AG, the parent company of KTM, bought MV Agusta. Pierer Mobility AG also owns the Husqvarna and the Gas Gas motorcycle brands.
KTM’s plan for 2024 was to continue what worked in 2023. It wanted to increase production in China and India while continuing the cost-cutting it started in 2023. As Motorcycle.com writes, Pierer Mobility did expect some headwinds in 2024, but didn’t expect what actually happened.
Losing Traction
In reality, interest rates and inflation remained higher than projected. Meanwhile, sales began riding off of a cliff in both America and Europe. That would have been bad enough, but remember what I just said about KTM’s plans to build more bikes. This led to a glut of motorcycles sitting at dealerships without people buying enough of them.
In response, Motorcycle.com says, KTM adjusted its sales targets, saying that it would see a 10 to 15 percent decline in sales in 2024. While that would end KTM’s three years of sales growth, it was still higher than pre-pandemic numbers. What changed? The decline is expected to continue on top of the company’s cost-cutting strategies not working, from Motorcycle.com:
KTM reported its results for the first half of 2024 on Aug. 23, reporting € 1.007 billion in revenue, a year-over-year decline of 27%. Earnings before interest, taxes, and depreciation (EBIT) over the first half was negative €195 million, compared to a gain of €97 million in the first half of 2023. That’s a net change of €292 million (US$305 million) in the wrong direction. The bicycle segment accounted for a €117 million decline in EBIT, with 75% caused by special write-offs as KTM restructured the division. The motorcycle division was responsible for EBIT of -€78 million (-$81.7 million) compared to a positive EBIT of €117 in the first half of 2023. KTM attributes the EBIT results to a sales decline (with the U.S. being especially volatile), costs from restructuring its bicycle segment and increased production and personnel costs in Europe.
Reportedly, KTM attempted to stop the bleeding by reducing motorcycle production by 25 percent, cutting R&D costs, laying off workers, and restructuring the bicycle division. While all of this was happening, sales in the United States continued to fall while share prices in Pierer Mobility looked like the plot of a plane coming in for a very short final approach.
Further attempts to right the ship included reducing the executive board from six members to two members while appointing a new co-CEO. Then, just earlier this month, Pierer Mobility announced it was in need of hundreds of millions to make 2025 work.
Restructuring
Finally, as Bloomberg reports, Pierer admitted that KTM won’t be able to pay for a “very high three-digit million euro” financing requirement, leading to the company voluntarily filing for insolvency in Austria. The process is said to officially kick off with the self-administration filing to be completed on November 29.
Of course, we are a U.S.-based site, so some of you are probably wondering what the heck a self-administration is supposed to be. As German outlet Speedweek explains, if a European company is on the ropes, it can get a chance to save itself, from Speedweek and probably poorly translated from German:
The plan requires the approval of the creditors involved in the debtor. The entrepreneur decides who these are. As a rule, he will approach those who are crucial for the continued existence or implementation of the restructuring plan. The claims of the non-involved creditors remain unaffected by the process and must be paid in full. This also includes employee claims. There is no provision for the court to notify the privileged creditors’ protection associations. However, the debtor or a creditor can actively bring an association into the process.
The European restructuring procedure is made public by the courts. At the request of the debtor company, creditors must also register their outstanding claims with the court in this procedure, as in insolvency proceedings. The European restructuring procedure meets the requirements of the EU insolvency regulation and is particularly recommended for those companies that have assets in other EU countries, as it is also recognized there.
Speedweek notes that Pierer Mobility had about 300 million euros in debt in 2022, but that number shot up to 1.5 billion euros during this year’s catastrophe.
In the short term, KTM says customers shouldn’t see any changes on their end. Dealerships will still sell and service motorcycles and the company still has new bikes in the pipeline. Instead, the changes will be behind the scenes. KTM will pause motorcycle production for January and February to help stabilize flooded dealers while also laying off an additional 300 workers.
Pierer also hopes to negotiate with its creditors to extend the maturity of about $262 million of debt and when the production facilities come back online, they’ll be producing fewer machines, too. For now, the company is going to spend the next three months ironing out agreements with its creditors.
So, if you own a KTM, the good news is that everything will be fine for now. However, the next three months are going to be critically important in determining if we’ll see quirky orange motorcycles for years to come.
(Images: KTM)
Apropos of not much besides “also motorcycles,” I can tell you that literally just having come back from motorcycle shopping with my gf there wasn’t a single KTM she fit on. Her feet weren’t even close to touching the ground, even on a Duke 390.
She’s been very constrained by size concerns, and has basically had to factor in the cost of lowering into every motorcycle. When we walked by some adventure bikes she was said “holy shit, I didn’t even realize they made bikes that big.”
So. 95% irrelevant, but just throwing that out there.
I’ve heard, motorcycles in general, but Harley Davidson men particular are hard to finance, because they’re hard to repossess. Not sure if that’s true, but would not surprise me.
^men particular is supposed say ‘in particular’
the typo added some flavor
This is what happens when you bypass the particular filter.
Former KTM dealer service manager here. They make some great bikes, typically higher priced, often more complex and more tightly focused that the Japanese competition.
But often, with the extra expense up front comes more expensive and harder to get parts and more complex and expensive maintenance too along with a thinner dealer network. And at least in the US, the bikes they sell are fun and fast discretionary purchases for recreational riding, not used for daily commuting. So people can always buy something cheaper, or hold on to their old bike if the budget is being pinched. Not to mention that motorcycles in general are competing for ever scarcer consumer discretionary time and dollars with things like cheaper huge screen TVs, $1,000 phones, streaming and stratospheric new car and truck pricing.
Not to mention motorcycles require actual effort to learn how to operate and enjoy. Guns are way easier (in the US).
KTM CEO Stefan Pierer is a ego/meglomaniac. What a surprise not the he tried to do too much. He was the solution and now he is the problem.