June 8, 2025
KTM's Bankruptcy Saga: A Tale of Growth, Challenges, and the Future
KTM has faced significant challenges leading to its recent bankruptcy, primarily stemming from an aggressive growth strategy focused on unit sales. While partnerships with Bajaj helped boost lower-cost bike production, post-COVID inflation disrupted supply chains and reduced demand. Rising interest rates negatively impacted sales, leaving KTM with substantial debt of nearly 1.5 billion euros and high dealer inventory. As they navigate this crisis, the company's future hinges on adapting to changing market conditions and managing operational costs effectively. Their story of growth, challenges and the future is still being written.
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00:00 - Introduction
00:54 - Focus on unit growth
03:35 - KTM has had a rocky past few years
08:12 - Oops, we're out of money!
13:10 - Lifeline from Bajaj
22:44 - Wrap up
WEBVTT
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A bankruptcy judge can fix your balance sheet, but he cannot fix your company.
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Welcome to the Throttle and Roast podcast. I'm your host, Niels Meersschaert. It appears that KTM may be able to emerge from bankruptcy thanks to a lifeline from Bajaj. Finally.
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While this is the last chapter in the book, the story of KTM's woes has been going on for much longer. We'll look at KTM got here, what's happened over the past few months with production stopping and starting multiple times, and what the future may hold for KTM now that they will have a new owner.
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So let's start with probably the most fundamental reason that KTM got here. And a lot of this, at least, is due to their strategy of really focusing on growth. And growth specifically in terms of unit sales. Obviously, whenever you're thinking about individual manufacturers, unit sales is a metric that people will use to indicate how successful or not they are. For KTM, they've really been very focused on this particular metric. And in many ways, this has actually worked out where they've been quite successful in that. They Europe's largest motorcycle manufacturer by volume. Now, many of the actual unit sales that they had were actually coming from their partnership with Bajaj. For their smaller 300cc ADV bikes. So you may know like the 390 Adventure R. All these smaller bikes really were fundamentally built by Bajaj in India. So lower cost labor. And that allowed them to sell these bikes at a much lower price. And therefore, they had higher volume. And they were pretty decent bikes. There's nothing wrong with the bikes. But they were really aiming towards that maybe entry level part of the market or more cost sensitive part of the market. The other thing KTM has done to try to increase number of unit sales.
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Is they bought a couple of the other European based competitors.
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Specifically within the more of the dirt bike part of the market.
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So this included brands such as Husqvarna, GasGas. Each of them has pretty much nearly identical bikes. Exactly. This does help keep R&D costs low. But it has been increasing production and parts management costs. Because even though the bikes are not completely identical. There's usually some variation. Like for example between the Husqvarna and the KTM on a lot of the dirt bike models. You might have one will have a different joint that's in the rear suspension versus the other. And that will create a little bit of a different feel between the two bikes. But most of the bike including the engine and everything is identical. But of course different plastics.
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They've got to now have multiple SKUs that they're actually shipping out to individual dealers. But I think their mindset for it They're buying them from KTM. Therefore their overall unit sales go up. as I mentioned, lower cost units from Bajaj, that was really a big opener for them. And when you think of a global market, which motorcycling of course is, And still be able to sell them with the KTM branding. So it works out quite well for them. so that's kind of where KTM originally started with, of just trying to build and go with this growth at all costs sort of a strategy. The challenge that they've run into is of course, post COVID inflation has been wreaking havoc on supply chains and margins globally. And for maybe some of our US listeners who think inflation is only a US thing. No, it's a global thing that has been occurring. And that's just what happens as demand picks up after the pandemic. The other thing though, and this is what probably what has hurt KTM specifically is that most markets, they try increase interest rates in order to dampen demand to take a bite, if you will, out of inflation.
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And the consequence of that is it depress demand, which makes it harder when you're trying to sell volume. And because KTM's business model has been so geared towards volume, a decrease in unit sales has a negative impact on earnings, but their costs don't necessarily go down from it. And that's gonna be the real key thing that we'll look at here.
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In doing so, in having this sort of melange that was happening due to post-COVID, they ended up owing creditors huge amounts of money. they had almost 1.5 billion euros in debt, and they were unable to secure financing to cover that expense that they owed. And because they weren't selling enough units, they had a lot of bikes waiting to either be delivered to dealers or sitting on dealer floors. And it's hard then to be able pay your suppliers if you haven't yet sold the bikes. Now, the other issue is that, as I mentioned, dealer inventory was quite high. So they shipped the bikes, they delivered them to the dealers, but then nobody was buying the bikes from the dealer and therefore inventory was high.
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there's floor charges that dealers have to deal with. this resulted in steeper discounts that had to happen. And KTM corporate would have to offer that to the dealers in order to be able to sell the bikes to be able to get that throughput so they don't have bikes sitting around for a year or two, three years just sitting on the floor.
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and this further put pressure onto margins. because of all of this happening, then last June, and this is meaning June of 2024, the board gave guidance that they expected unit sales to drop 10 to 15% for the fiscal year 2024.
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that's for a company that's been so focused on growth, that's a really significant reduction in unit sales. by August, they reported on the first half of 2024, and they had revenue declines year over year of 27%.
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I mean, this is a really huge hit to a business where if you're focused on volume and you've got a 27% reduction in revenue, There's going to be negative impact. In fact, they even showed a loss for that first half of 2024 of 200 million euros, and that's before taxes, interest, or depreciation.
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So, really went from being a growing, profitable business to suddenly losing money, unable to pay vendors, and not in a great situation. So, it's amazing how quickly the tide can turn for a brand. Now, they ended up having to lay off some employees. They ended up reducing production by 25% to try to reduce some of that dealer inventory and even just inventory sitting at the factory waiting to be shipped. By October of 2024, unit sales had dropped to be about the same as the entire 2023, but the mix was more towards the lower cost models than the high ticket and profitable premium models. So, if you think of things like the 1390 Super Adventure, the 890 Adventure, some of their higher tiered bikes and the Husqvarna equivalent, these bikes were not the ones that were selling. They were selling a lot of their 300, 400 CC low-end bikes and that's fine for unit sales, but mind you, the unit sales were the same, but now the mix is different. So, their actual revenue was still decreasing, but they weren't as profitable.
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So, this is where you get that sort of bad situation.
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what happens if this continues going for a while?
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Well, oops, we're out of money.
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And that's fundamentally what happened to KTM at the tail end of 2024. And in an effort to try to avoid a huge amount of oversight, they really wanted to themselves. They went into what's called self-administration. And this is sort of a way of doing it as opposed to having an outside observer who is administering the management of your bankruptcy. They kind of went into their own with effectively opening up a window of 90 days for them to restructure and figure out a way out of this situation that they were financially. They actually ended up completely pausing production for January and February of 2025 as they tried to work with creditors and get some bridge financing. no new bikes were being built for two months of the calendar year. And there's been a ton of speculation about who might be a possible buyer.
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If you look at the racing series, you'll see that they have a big partnership with Red Bull. And people were thinking maybe Red Bull will end up buying them because they've been working with them for years. BMW was seen as a fellow EU brand that had also had continued growth, albeit not at the growth at all costs mindset that KTM had had.
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And they were looked at as being a very strong contender. The irony, of course, for that approach is that Husqvarna was actually owned by BMW and then sold to KTM. So if they were to have acquired it, then KTM would have basically sold Husqvarna back to BMW. But everyone thought that a bailout from Bajaj made sense since they were already a nearly 50-50 partner in Pierer Mobility. Now, Pierer Mobility, of course, is the parent company of KTM. And when we think of KTM, KTM doesn't directly own Husqvarna and Gas Gas. They're actually owned by Pierer Mobility. that company then owns all three brands. So when we say KTM, I'm referring to really more fundamentally Pierer Mobility, most people don't know that name. So think of it as KTM. Pierer Mobility, of course, is named for the owner of it, Stephan Pierer, who was the CEO KTM for decades at this point. I mean, he's owned the brand for a long time and has done, quite honestly, in many ways, a very good job of growing the brand. It moved from its pure dirt bike origins to starting to add in more of the adventure bikes. Their adventure bikes are very well regarded.
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They're incredibly capable bikes.
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There are some issues that people have had about reliability, which is sort of a secondary aspect that was probably mixing into this. I know for me personally, I had thought of getting a KTM for a little bit more off-road oriented ADV bike. But the reliability was always giving me a pause because it's like, well, you know, my BMW is amazing and it will last forever. The KTM, I'm not so sure on. And that was not me being the only person having that sort of mindset. Now by, March of 2025, Stefan Pierer fundamentally forced out of KTM as the CEO and had to become, really have a co-CEO who was sort of leading this with him.
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And they were able to secure a small funding of about 50 million euros to restart production. So, everyone was excited. We're like, wait, we had two months of no production in KTM and now we're getting it restarted. Well, unfortunately, by April, they had to stop production again. And, ostensibly, this was due to a lack of parts. But it's more realistic that it's probably because they never paid for the parts that they'd already received from suppliers. And suppliers were, rightfully so, concerned about delivering parts and then never getting paid for them. And because of this continued insolvency concerns that KTM had, suppliers were starting to demand payment up front. And with little cash on hand, KTM had no choice but realistically to shut down again.
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Now, this did result in some further layoffs. But in an effort to reduce those layoffs, or at least mitigate them in some they ended up reducing hours for some employees. So, instead of working a 40-hour week, they knocked it down to 30 hours, but then adjusted their pay, even for salaried employees, accordingly. So, rather than being a full layoff, they basically took, like, a 25% pay cut And that leads us to the lifeline, and this is the most recent chapter in the story, which is that Bajaj, who had been 49.9 to partner in Pierer Mobility, so the other 50.1% was of course owned by Stephan Bajaj is now acquiring that other 50.1% of Pierer Mobility in a deal worth about 800 million euros. They've also provided a loan of about 450 million euros along with 150 million euro bond to help pay off creditors. And they even contributed another or 200 million euros to restart production. So a huge influx of cash from Bajaj in order to get this back up and running. this is just to get it back into regular production. This doesn't say anything about whether all of the concerns that consumers may have had with all of this instability. Do they want to invest in a brand who knows if it's going to be around? There was a lot of speculation about this. are going to have to see if that turns around for them.
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Now, with this change, Stefan Pierer will be fully separated from the brand that he's led for the past 30-ish years once the deal closes, and it's expected to close in June. So what's next?
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Well, Bajaj is the production partner for the smaller road bikes in the KTM Husky Gas Gas Line. Bikes like the Svartpilen 400, the 390 Adventure. These were all built in India by Bajaj.
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And it's likely that those bikes will continue, especially for the Indian market it makes a lot of sense. You can get a European brand, but for local Indian prices effectively. But they've also been cost-effective options in other parts of the world, and they've done quite well. We talked about in an earlier episode that the new 390 kind of more off-road oriented adventure bike was also being announced at the tail end of last year. And this was another one of those Bajaj built bikes that would come online. So these bikes will likely continue. But the one that's the sort of the open-ended question is the bikes that when people think of, "Oh, what do you aspire to as a KTM?" It tends to be more of those premium type bikes. It tends to be, at least in the ADV section, we'll talk about the off-road in a moment, but for the ADV, things like that 1390 Super Adventure, the 890 Adventure, the Husqvarna equivalent of the 890, these are the bikes that most people think of as, "Oh yeah, I'd love to get a KTM or Husqvarna." And those are the bikes that they would aspire to.
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These bikes were always traditionally built in Austria.
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the big question is will they continue? Will they be built in Austria or will move out of Austria, that bikes. The off-road bikes, which KTM has been a major leader in the production of, were also built in Austria. Along with their sister brands of Gasgas and Husqvarna. Now, cutting costs by moving production out of Austria could help KTM's finances. Being fully owned by Bajaj, now an Indian brand, there's probably little internal pressure for them to say, "Hey, let's keep production in Austria." It was originally an Austrian brand, but that doesn't mean that we need to stay built in Austria.
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And if we look at a little bit of some movement in the past couple of years. The 790 ADV bike which was originally built in Austria until it was superseded by the 890 version.
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Well, they actually brought back the 790 effectively exactly as it had been, but built by CFMoto in China. And this allowed them to cut the costs on that bike and offer it as almost like a lower end tier versus the 890.
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So if the 890 was too rich for you, the 790 was almost as capable of a bike, but produced in China, therefore was a lower cost. And so you could see the same thing happen with Bajaj.
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Maybe they decided, "Let's move the production out of Austria.
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We'll move it into India and produce all the bikes for these brands in India." The thing is with such a strong connection with Austria and Europe more generally as Husqvarna was originally a Swedish brand while GasGas was Spanish this begs the question if all of the ktm lines are no longer made in Europe can you really call them KTM anymore and i think this is the real open-ended question for what is going to come to pass because whether or not someone decides to pay the premium for a KTM brand over let's say something like a Honda is really a lot of it comes from well where is it produced and being produced in Austria has a certain impression that that has a higher quality aspect to it and this is where if you think of the Japanese brands will tend to be for a similar capable bike maybe not absolute high performance but similar capability Japanese brands tend to be significantly cheaper than KTM but in spite of that because of the performance capability people have been more willing to even buy those bikes so KTM has still been a huge huge seller because of that impression of higher performance and higher by virtue of being built in Austria and I wonder if you take away built in mindset if that premium that people hold the brand to will maintain while they've been able to produce lower end bikes by Bajaj in India already they aren't necessarily held in the same esteem as some of the higher end premium bikes and that's why people are only willing to spend a little bit of money onto them and they're still good bikes i don't mean to diminish that in any way but they're not thought of as being that like super high performance capability now that bike that i alluded to that new 390 that's more of a almost like an enduro r kind of spec so it's a little bit more off-road capable may change this equation a bit because it's no longer just a street bike if you will knobby tires and really not meant for super super off-road like their premium bikes it's kind of that low cost one and this could jump start and maybe offer because i know that people are complaining too about just bike prices in general have gotten insane this might be a way to get more people into a brand by having a more model even if it's not this huge engine which especially for off-road you don't need that can be compelling bmw is probably reaching into the same realm you saw this past summer the bmw 450 their enduro type bike really meant as a full adv it looks like a miniaturized r1300gs they presented this as a concept and it's probably very close to production so we will expect probably this year later this year that it will they will announce that it is going into production but by being a smaller engine capacity they're able to offer that at a lower price and especially if you think of even the GS the the big boxer GS today is over $20 000 here in the us for a base model it's very very expensive and not everyone is going to have the money to spend that kind of money on a bike especially if you're intending to take it off-road so having something that's a little bit more cost effective could be beneficial this is where i'm of two minds with what's going to happen with KTM of i think getting the prices down will help in terms of making it more open to more riders even maybe some riders who maybe live and breathe in one other segment of motorcycling let's say like cruisers or sport bikes and they've been thinking of doing a adv bike but they worry that they were too expensive if they're able to get the pricing down a little bit and still give them a good adventure touring bike but at a much lower price premium they may be willing to add that into their garage at the same time point of the spectrum wants more of a off-road centric bike rather than one of the premium touring bikes like that 390-ish sort of spec If you can get that and still have the performance, but the lower cost, that could be an advantage. So I think the 6 to 12 months is going to be really interesting to see what Bajaj does with KTM, whether they stay in Austria, whether they use their economies of scale to even move sub-assembly production out of Austria. So even a final assembly is still done in Austria, but they can get the sub-assemblies done outside of it, thus keeping the costs a little bit more in check. They can really optimize from a cost basis to make it sure that they're going to have the, if you will, financial stability to weather storms like what we got with post-COVID. After that, I think this is the real open-ended question.
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So let's wrap up. We discussed how the focus of unit growth got KTM to its current state, along with all of the changing dynamics in the broader market from inflation and interest rates. We also looked at how the past roughly 6 months for KTM being essentially in bankruptcy and starting, stopping, starting, stopping production, as they tried to claw their way out of this financial situation. And finally, we looked at what the future might hold for KTM now with Bajaj giving this lifeline. What does this mean for KTM in the future? So my question for you is, has the recent turmoil for KTM kept you from buying a bike that you were planning to get?
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Share your thoughts through the text, the show link in the show notes, or leave us a voicemail at throttleandroast.com/voicemail.
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Thanks for listening. I'll talk to you next week.
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