€800 mn buy, insolvency, inventory spike… Bajaj Auto readies big overhaul at KTM

Pune-based Bajaj Auto will look to discontinue smaller brands under KTM, rejig core operations and unlock synergies between the supply chains of Bajaj and KTM to reduce costs, according to management commentary during the earnings call and meetings with analysts.

“After the KTM acquisition, Bajaj Auto would now focus on the restructuring of the core operations. They would also look to leverage synergy benefits in manufacturing operations, the supply chain, and the distribution network," analysts at Motilal Oswal wrote in a 15 December note after meeting Bajaj Auto's leadership team.

A revival plan for KTM is aimed at bolstering its premium offerings, as its exports remain profitable, while India’s fourth-largest two-wheeler maker’s domestic market share continues to decline.

Bajaj Auto acquired struggling motorcycle maker KTM for about €800 million. The management told analysts that the company is looking to exit the bicycle, cars and other smaller brands to focus on the KTM and Husqvarna motorcycles. Efforts will begin in earnest in the first half of calendar year 2026, the company said. KTM has a sports car brand KTM X-Bow.

While its main plant is in Austria, KTM has assembly facilities in China, Brazil and the Philippines, among others. In 2023, all the facilities produced 380,000 bikes. In India, the Bajaj-owned Chakan plant produces vehicles for the local market and exports.

“Management has indicated that 1HCY26 will be the year of consolidation/restructuring, and from 2HCY26, one can observe operational benefits of these measures," the Motilal Oswal analysts wrote in the note.

Queries emailed to Bajaj Auto remained unanswered until press time.

Bajaj Auto’s top officials said in a 7 November earnings call that the company plans to overhaul KTM’s operations.

“It is fair to assume that as we (Bajaj Auto) get involved, once the change of control happens over the next couple of weeks, we will then put in place a full-fledged program for the operational turnaround that straddles pretty much the front-end and the back-end including rationalization," Rakesh Sharma, executive director at Bajaj Auto, told analysts during the July-September earnings call.

KTM’s European setback

Following a slowdown in the European premium motorcycle market, KTM filed for insolvency and applied for judicial restructuring proceedings in November 2024.

The company’s inventory spiked as sales declined, keeping its capacity unused. In 2024, KTM sold 292,497 motorcycles, a 21% decrease from the 372,511 units sold in the previous year. To fuel its expansion, the company had also taken on total debt of more than $500 million. As income declined, KTM found itself in a difficult position, ultimately leading to a bankruptcy filing.

Bajaj Auto, which operated the company a joint venture with Pierer Mobility AG since 2007, acquired it in May. Bajaj will infuse €600 million into the company through debt funding, while €200 million has already been invested since FY2024, taking the total amount of the deal to €800 million ( ₹7,778 crore).

Turnaround plan

Strengthening performance in the international market was one of the stated reasons for Bajaj taking full control of KTM in November. According to Bajaj's own plans and independent analysts, the initial turnaround plan will focus on paring costs and stablizing KTM’s balance sheet, given its high debt.

Bajaj will also leverage synergies between the two businesses. That’s similar to Tata Motors Ltd strategy for its largest-ever acquisition Iveco, as it looks to reduce supply chain costs and build products together.

Cost reductions in the initial phases always help, as has been the case in the past but Bajaj Auto will need a thorough analysis of the situation at KTM, said Subhabrata Sengupta, partner at Avalon Consulting.

"Ultimately, it will all boil down to product. What will help the company is a root-cause analysis of whether KTM products are working with consumers or not. A market for premium motorcycles is always there, but it needs to be understood clearly why certain products did not work," Sengupta said. “In the short term, cost reduction will help. However, in the long term, the strategy will have to focus on getting the products right."

While Bajaj has not clearly laid out the product plan for KTM globally, Sharma said during the earnings call that Bajaj is working with Austrian motorcycle maker to under how it can benefit from aspirations of consumers to move towards more premium products after the goods and services tax cuts in September.

KTM is a premium motorcycle brand which can help Bajaj Auto take on Royal Enfield and the premium models of other competitors, including TVS Motor Ltd, Honda Motorcycle & Scooter India Pvt. Ltd. and Suzuki Motor Corp.

The KTM brand revival would help eliminate the drag from a loss-making business, according to Mumuksh Mandlesha, research analyst at Anand Rathi Shares and Stock Brokers.

“Stake in KTM has been a small contribution to Bajaj’s valuation over the years. KTM can boost its margins from the business, but it will take time, perhaps maybe at least two years, before meaningful gains are seen," said Mandlesha. “But a drag on overall financial performance will reduce after the full revival."

Domestic woes

The turnaround plan comes when Bajaj Auto’s domestic sales growth has slowed. According to data from the Society of Indian Automobile Manufacturers (Siam), its market share slipped from 12% in April-November of 2024 to 11% in the same period of 2025.

Between April and November, Bajaj Auto’s two-wheeler sales in the domestic market fell 5% from a year ago to 1.59 million units. The overall bike and scooter market grew 3% to 14.3 million units during the period.

Bajaj Auto is the worst-performing legacy two-wheeler stock this year, with its shares up about 4% so far in 2025, compared with a 21% rise in the Nifty Auto index.

The company is losing in the mass segment below 125cc as Honda gains. According to Siam data, sales of Bajaj in 110cc to 125cc range motorcycles fell by 13% to 561,328 units. In the 75cc to 110cc segment, its sales dropped 12% to 335,894 units.

"Management targets to recover the lost share in domestic motorcycles on the back of a few new launches, which include the new 125cc commute motorcycle, which is likely to be launched in FY27E, three Pulsar variant launches in Dec ’25, Mar ’26, and May ’26, and intervention in the Dominar brand," analysts at Motilal Oswal said.

However, domestic challenges have yet to hit the balance sheet, as Bajaj Auto posted a 53% rise in net profit to ₹2,122 crore in Q2 (July–September). Its domestic underperformance has been outweighed by exports, which grew 14% in the April to November period to 1.24 million units.