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For Piaggio, India marks peak stability in Asia business, ET Auto - Awaj Ludhiana Ki
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For Piaggio, India marks peak stability in Asia business, ET Auto

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November 19, 2024
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<p>India is also a key hub for Piaggio’s commercial vehicles and the company had actually kickstarted its second innings with cargo three-wheelers.</p>
India is also a key hub for Piaggio’s commercial vehicles and the company had actually kickstarted its second innings with cargo three-wheelers.

New Delhi: Italian automaker, Piaggio has indicated in its latest results that India continues to be a stable market for its two-wheeler and commercial vehicle operations. The company has had its operations in Baramati near Pune in Maharashtra for over two decades now.

Michele Colaninno, CEO, recently told analysts soon after the January-September results that India was holding its own in Asia, a region where other countries have seen greater levels of volatility. The transcript of this session has been uploaded on the Piaggio global website.

“India, coming a little bit in the oldest area, we are satisfied, margins are growing, our productivity is okay, the production of the global Aprilia bike 457 is going, I would say, even better than we forecasted, even if we started just recently,” he said. The reference to the ‘oldest area’ is perhaps to do with Piaggio’s long tenure in the country compared to other regions in Asia.

The company, incidentally, had on display other products related to the 457 series at the recently held EICMA show at Milan, Italy. “The customers are very satisfied on what we are showing them for the next year product line. So for India, we foresee a growing situation at the EBIT (earnings before interest and taxes) level, and also the margins are good. We do not see any disruption by the end of the year, so it will continue to do as it has done since now,” said Colaninno.

Commercial vehicle hub

India is also a key hub for Piaggio’s commercial vehicles and the company had actually kickstarted its second innings (after parting ways with LML for the Vespa range of geared scooters) with cargo three-wheelers. This was part of a carefully thought out strategy to get into the less glamorous B2B space first before foraying into the two-wheeler B2C segment with Vespa and Aprilia.

“Commercial vehicles, as you know, we have a major production hub in India that delivers vehicles to surrounding countries. The margins are good and the market is going back to 2019 (levels). We do not see any major issue that would put us in difficulties also for the next year,” explained Colaninno.

Beyond India, the Asian market for Piaggio has been “continuing the path that it started to have” at the beginning of 2023, with declining markets in Thailand, China, and Vietnam. All these were happening for different reasons but “mainly due to consumers’ attitudes to spending” which have ended up being lower than the preceding year due to “political issues” and high interest costs.

However, Indonesia has been growing well and Colaninno said he was also satisfied with the showing in “minor countries” such as Taiwan, the Philippines, and Malaysia where Piaggio had recently begun operations and planned to be in “a better position” in the coming years. The Philippines, in particular, was an attractive target because the growing GDP per capita “pushes us to be more present in the area of Manila”.

Touching rockbottom

Later, during the Q&A session, the Piaggio CEO had this to say: “I see something interesting and positive in Vietnam, something interesting and positive in Thailand, but it’s just a few units, if you compare it to the beginning of the year. Let’s say that the declining of the markets is lower than before. So it seems that since June, we are touching the bottom. It’s a positive sensation that we have from Asia Pacific areas.”

China, meanwhile, has been declining in the premium and luxury markets but Piaggio is keeping the dealer’s distribution safe in all the areas. “We are not pushing to sell-in without having a real sell-out in the whole market,” he said.

In response to an analyst’s question, Colaninno said the Chinese market is growing and will continue to do so, no matter what. “I don’t have any doubts, because they have more than one billion people. They are growing in GDP. This year is disruptive for the area but I think the curve is positive. They will grow, and they will grow in premium, they will not grow in cheap,” he elaborated.

Colaninno was also hopeful that the overall global political situation would “in some way” be better since it was a challenge managing “some hysterical markets” at a time when it was important to focus on a mid to longterm strategy. Parts of the world are seeing wars being played out in West Asia and Europe while there is tremendous uncertainty elsewhere with the US likely to impose stiff tariffs beginning next year.

Interesting product line

“If I have to think from now to next year, the product line will be very interesting from a customer point of view. We will not have a major increase in prices and continue to work on decreasing costs, potentially on raw materials and logistics due to the fact that there are wars and tensions around the world,” he continued.

Piaggio will also continue to invest in marketing activities “that are correct for the customer today”. These will include the digital world of e-commerce as well as investments in fashion and apparel related to the Vespa brand.

By the first half of 2025, the Italian automaker will have reached its “peak” of capital expenditure. “We will then start to see some declining need of investments since we have filled the gap on the two-wheel product line with the competition regarding some displacement that we didn’t have. So we are starting to complete the product range,” explained Colaninno.

Coping with competition

As for growing competition from Asian two-wheeler brands, he said the Piaggio Group would continue to push on increasing the value of the brand. “We are not saying that we are too far away from the price that we see from Asian competition… we have production in India and Asia, so we know the situation,” he added.

By the end of the day, if a customer wants to buy a product, he/she will also look at what they are buying. “On a different side, if you just want to search for a price, well, you can buy whatever you want for cheap price and cheap quality sometimes. So I’m not worried about competition. It’s our task to beat the competition, and that depends on the people working at Piaggio Group,” signed off Colaninno.

  • Published On Nov 19, 2024 at 04:58 PM IST

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