from what i could understand after talking to the sales head in bangalore ducati was - they are finding it difficult to match the overheads of the dealership with the monthly sales. along with it the imports are costing heavy each day - makes me wonder why as the euro definitely is falling.
guess with the tiny margins the dealerships have (about 7-8% gross) they need to sell atleast bikes worth Rs. 1.25 Cr. just to stay afloat.
considering the average cost of a ducati - starting from 8 lacs and going all the way to 22 lacs for the diavel red carbon - the average comes to 17 lacs.
so to stay afloat they need to sell atleast 8 bikes a month across the range.
now as we all know - the monster sells the most - so they might have to sell about 15 odd bikes each month - which today is way too ambitious. i doubt whether they are selling that many bikes pan india, forget bangalore.

basic reason for ducati's failure also might be freakishly expensive bikes and as i have been hearing off late - its not popular with youngsters as it doesn't have that sound of an inline 4 japs. so the entire idea of a bike for showing off to the world is lost only because it doesn't sound that great. and heck it's atleast one and half times more expensive than the japs.

the other day i was talking to one of the ducati 1198 owners and he said that the maintenance of the bike is freakishly expensive. the mumbai dealership is asking for 15k for the service alone + to and fro and accommodation expenses + labour charges at Rs. 1500 per hour or something. makes me wonder what are they charging 15k for if they are also charging 1500/hr for labour.

guess ducati needs to rethink its strategy for india by trying to keep the prices a bit realistic (i remember last year there was a major cut in the prices but they seem to have gone up again) if they want to maintain their brand in india. as these kind of obscene prices for buying and maintaining the bike would only mean more dealerships closing down and more bikers not interested in buying their bikes.

The service costs that you have mentioned are obscene. The sales numbers per month that you have mentioned are pretty difficult to achieve despite the growing acceptance in our market. Unfortunately it looks like the writing might be on the wall for Ducati in India.

My office called Ducati Blr and the a sales guy apparently said that the Showroom is closed for renovation and is going to open up in Dec-Jan with 2012 models. Thats weird as renovation under 6 months, all they need are the New Panigale posters and paraphernalia and of course new stock. From the experiences quoted in buyers refund of cheques its quite clear that the dealership realized that the business is not profitable and shutting shop amongst other probable reasons i have heard from others like non-delivery of stock by the Indian distributor etc. The location is on the high street of Bangalore and rentals will be scorching and obviously the dealer knew the long term payback of the business say around 5-6 years but something else must have also gone wrong.

FYI the Ahmedabad showroom is also likely to be shut down, news from a friend in Ahmedabad, apparently Ducati wanted the dealer to invest more amount on showroom and not supportive with stock when orders are taken.

Ducati has been making big big mistakes from the start especially with pricing and revising them several times over and then this. I think the whole issue is pretty much messed up. There seems to be no learning at all and thats what happens when manufacturers tie up with distributors who only have money but no passion nor the ability to understand the products or its customers or how to position and price them.

A lot can be learnt from Harley, they too were overpriced except for 883 Sportsters at launch, just after a few months of launch they commenced CKD ops on the Sportster range and now from Dec-Jan the Dyna range is also going CKD to pitch them at prices that they are meant to be sold at. That means they are truly engaging with the market by understanding customers perception of the brand and the price at which they mean business.

In all foreign currency transaction, the forex is first converted into the dollar first and rupee later, so the euro rate does not matter much. Dollar is now touching 55 to a rupee now.

I would do the same (the high charge of service) if I had the dealership. If I am not selling many bikes a month, my high street rentals(Lavelle Ducati rental should be around Rs. 7-9 lakhs/month) and overheads are crazy, where would I make a living out of? While it is easy to blame the dealer, this is a game where no one seems to be making much money.

Unlike Kawasaki who have not invested much and depends on their Indian partners for distribution, there is not much at stake. But for a brand which only sells high end motorcycles, everything is at stake.

CKD programs are easier said than done. Since Ducati is through a distributor here, they will not invest in the start-up costs associated with assembly - there is no guarantee their distribution agreement will be honored once their agreed term is up. Only fully owned subsidiaries will set up standalone CKD programs (Bajaj is different, because they are already in the business of manufacturing motorcycles).

India is a hard place to do business and make money.

From the outset for most people who think from a business perspective, having a stand alone premium superbike showroom like Ducati or MV Augusta etc is neither going to be a money spinning business nor one where he is going to get his investment return soon. Thats why with loads of commuter bikes flying off the shelf, each individual Kawi, Yam, Suz & Hon dealerships wont feel the pinch even if they sell 1-2 superbikes per month. Whereas Ducati dealers should very well know when entering this field that its only the bike sales, service, parts & accessories that bring in revenue. Unless he is a millionaire who likes to keep the dealership for the prestige factor, this business is not one where leave alone making profits, the word break-even is also a long shot for the initial years.

As for CKD, its not as simple as the grey market dealers bring bikes in parts & assembling. There is a lot more to the whole process with tax holidays, employment generation blah blah..and hence it is just not a viable option for Ducati prices & volumes. Infact Harley's top selling model in many parts of the world is still the sportster and one of the Harley Middle-East reps told me many months back that the sportsters for Middle-East and other Asian markets may sometimes come from the Indian plant in future. So Harley has a clear game plan if they have spare capacity and hats off to Harley for pricing the CKD models more practically in India. Even in harley's case the non-sportster big-bore Harley sales have not taken off as much as they have wanted.

In Ducati's case I sure feel sad for the Indian dealers if they have had to shut due to the losses, but I hope Ducati comes out with some plan to revive & restore customer confidence or it could be an irreversible damage to the brand in India.

The best bet for Ducati and especially European manufacturers (barring Triumph) is to have just one Dealer for India with one decent showroom to sell & service all over the country. I simply wouldn't care if they were not in my city, if i wanted one id just go buy from where they are available. They can have their service guys come and do the service. This makes a whole lot of sense for the Dealer, the Brand and more importantly getting the pricing right. And when they have the experience in years they can move on to CKD based on how the market evolves and a host of other things.

Having dealers bleed for a Brand is what most manufacturers do but in some cases the brand takes a hit as well, especially in the auto business.

Another freakishly crazy story would be of my neighbors' monster! He bought the bike in Dec 2010, had a spill in Jan 2011 and is still to this day waiting for Ducati India to 'order' a replacement handle bar mount and brake pedal. The bike isnt even registered as it cant be ridden to the RTO. Just the other day he was telling me that he might sell it in its present condition as he cant take the headache of weekly followups anymore!
So leave aside the exorbitant cost of spares and labor, the guys dont even want to order parts for broken down bikes!!

well said. but still they should think about getting the bikes cheaper. just because they are italians doesn't mean they need to cost 50% above japanese bikes. i am sure even they can do some real clever engineering to bring the cost of manufacturing down so that the cost of importing falls down too. on every one lac saved to manufacture the bike would result in saving of 2.14 lacs on each bike.
at the ducati factory they have less than 500 employees to build their bikes. let's say they think of targeting india with maybe 5 % of their sales. how much would that kind of setup cost? obviously they wouldn't need that kind multiple bays for churning out 50 bikes per day. maybe one assembly line should be sufficient. if the next door chhotu mechanic can assemble the bike (grey imports) within a matter of hours when is isn't exactly well equipped - how much investment would be required to start off with maybe assembling one bike per day by official ducati mechanics? couldn't be that much now - could it?


though one thing is not clear enough - how come the rising EURO value not effect the bike's price?
i am sure it must be having effect on it's dollar prices too. it can't be constant with the rising dollar. if it is - then i might as well exchange my euros to dollars to rupees.

Unless the models are significantly de-spec'ed, costs won't go down. And if Ducati does too much of that, their motorcycles won't be desirable at all. But for sake of this discussion, I have made such an assumption below.

Theoretically, what you say on assembly makes perfect sense. But when it comes to implementing, say, the assembly line in question, there are a few complications.

First, manufacturing in India needs to be part of Ducati's long term plans. And unless the set-up is huge, and geared for exports, it might not be worth doing it at all. Because unlike huge cars plants in India, like Hyundai, Volkswagen and Maruti, who bargain with state governments on concessional land rates and other sops, Ducati would have to buy/lease land like any other joe. Which makes the start-up/overhead costs quite high from the onset. And even small assembly set-up will still need a lot of space - loading bays enough to take a few 20 ft containers, shipping bays, parts inventory warehouse, common, administrative and open areas. I would say at least 50,000 sqft of space at the bare minimum. Which is 25 Lakhs/month rental right there even if you rent space in a village removed from the city.

Secondly, there is a huge difference between a neighborhood Chotu assembling grey market bikes and a brand doing it. When a brand gets into manufacturing/assembly, it will make sure that the facility is compliant for labour (competitive market wages), environmental safety and health and the equipment is per the international norms. Which means what Chotu does through a combination of spanners, wrenches and bit of banging, Ducati will use a machine which will cost a lot. That also means training workers, paying them competitively and retaining them as well.

Thirdly, manufacturing in India is a pain - there is no consistent government supplied power so you run on Gensets which adds to high cost of energy, the roads are still potholed (one should step off the GQ and venture into SEZ zones and industrial estates, the roads can swallow a 4x4) and the paperwork kills. Since this is only assembly, Ducati will still have to import many of components, and they will still have to pay duties even if the parts come in from a FTA country. Basic customs duty is just part of the picture - there are other shady taxes like countervailing duties/excise/educational cesses which we don't hear of. So with very low volumes for domestic consumption, the assembly/overhead costs per motorcycle might be equal or greater to the difference between the CKD parts duty and CBU duty.

For assembling 50 units a day, everything else needs to work like clockwork. The parts inventory need to come on time to assemble - and with unreliable ports (strikes, holidays, lacking of vessel docking space, yada, yada), that will be a huge challenge.

Even if Ducati drops their price of a Monster(or gets in a new 'low cost' variant) from 9 lakhs to 4.5 Lakhs OTR, it is still a hideously expensive product by Indian standards. A few hundreds of us might buy in the beginning, but sustaining 1500 units a month? I don't think so. Even if they put a Trellis frame on a new 250 engine and sell it at 3 lakhs.

On the foreign exchange topic - if you are trading in forex as an individual, yes, you make money off fluctuations based off the daily/monthly market rates. But forex rates in most companies follow an accounting rate which changes around once a year and all calculations on profitability are based off that. If the currency gains or falls, that is adjusted in forex loss/profit as a separate heading in the financial statement.

guess you misread me. i meant they DONT need to put up an assembly plant for 50 units per day.

one unit per day churn out is also good enough.

and what more if they price the product right (somewhere in the jap territory, maybe lower) they might want to increase the production to 2 pieces per day. i am sure the demand of the bike would rise sooner than anticipated.


to come to think of it - since i am in automobile component manufacturing industry - setting up a plant of 50,000 sq. feet won't be that big. heck both of my plants are bigger than that, with a newer one bigger than both of them put together. and that doesn't need 25 lacs as rent. i mean it might mean that kind of rent in places close to big cities - but we are talking about 5 digit rent figures here - in the lower half. land is also not that expensive considering average joes like me can afford about 1.5 lacs sq. feet without much trouble.
the idea is to put up the unit in the industrial areas in unexplored cities like pithampur, dewas, nasik etc. not in pune, mumbai, bangalore, chennai, hyderabad etc. the cost of land as well as manpower goes substantially high in these places.
a small chunk of land of let's say couple of acres would cost about 2-3 cr (at the most in the area where my factories are). building cost wouldn't go above one crore. what would be expensive would be the equipment, but since we are not thinking of making anything here, the most expensive ones wouldn't be needed (CNC, CMM, robotics, yada yada yada) but what would be needed would be quiet basic like torque wrenches, different types of gauges and maybe pneumatic tool kits. along with these there would be only one expensive thing that would be required and that would be the QC department. they would need a dyno, and all the other equipment they need to check the vehicle. approximately 10 crores would be required for the entire setup (this ofcourse is purely an assumption that the QC wouldn't exceed 1 crores).

now comes the legal issues - which i just found out that initial ckd is allowed and then on we have to give a phase wise plan to grow the indian industries' share in the vehicle. which can be taken care of when the brand is selling well. maybe after 3 years.

as far as my brain cells go - i see not many problems in it.

At the end of the day - it all depends on what scale the brand is looking at. Investments are worth making only when in sync with long term plans, even if it is 10 crores. If I was at Ducati and I had to go through all the trouble to make 25 bikes a month, I would rather not do it. I have spent long enough in manufacturing of Industrial products to realize that through experience. Like I said before, the difference of duties between CKD and CBU's would be equalized by just the operating cost of keeping the set-up going and amortization of start-up costs.

On the location - one would have to stay near big cities - a Ducati assembly plant will need a few expats, and trust me, no one is going to move to India if it is in middle of nowhere, even if there is a 50% hardship allowance over their base compensation. Most expats even find our so called 'big cities' find to live in.

What kind of pricing are assuming here for a Ducati motorcycle? 4-5 lakhs? Add local taxes to that, and one still lands up at a price which is far beyond the reach of most consumers who'd want to buy. Not enough to drive scale. And they should definitely not sell 200 cc motorcycles at 2.5 lakhs - certain brands should stay premium and Ducati is certainly one of them. For consumers in that segment, choices like the Ninja 250, CBR are good alternatives.

what you say is what i have been thinking about. initially they need to setup a shop of 25 bikes a month, and then escalate it to 50 bikes a month if the demand is such. but i think they would do just fine making 25 bikes. the amortization cost wouldn't be laid over on 300 bikes of the first year but it would be spread across on maybe 1000 bikes - that would mean just Rs. 10,000 per bike. this ofcourse in a normal commuter bike would be a huge price difference, but wouldn't be much on a exotic.

and i am not suggesting to put up a plant in some totally remote place, but it would be better (and more economical) to come up with plants closer to second tier cities. where an expat gets all the basic facilities he needs and also the company doesn't have to bear the cost of more expensive land, labour, resources etc. this cost reduction can be directly passed on to the customer making the bikes not as atrociously priced as now - but get the cost down by maybe 30 odd %. which in a 14 lac bike means 4.2 lacs bring the cost under 10 lacs and making the bike more desirable immediately.

wonder why have the other manufacturers not though of such a simple plan when they already have their huge factories making thousands of bikes each year. and by making i mean all they do majorly is assemble only. so how much would one assembly line cost?

In my opinion these exotic show rooms are generally conduit for some other business . I am not sure Indian market is mature enough for them to be profitable. Only one who are doing it right is Harley.

On a different note I got my XUV500 W8 (RED) two days back. My bike was supposed to come way before this. At least I got something before the promised delivery date . Can I put up some review here? Powers that be at team-bhp never approved my account. Gave up after three attempts. Looks like they are more stringent than apple

-V

Amen brother, seems like they are looking for some particular type of essay answers, have been thru the same.

@vishwa

please do post your initial reviews. planning to buy a bunch of them between us friends.

i never knew getting into tbhp was that difficult. i somehow don't remember clearly but i think i got in pretty easily.

on the stand alone superbike showroom - what will happen if someone comes up with a multibrand dealership where all these bikes are retailed from one showroom only.

one might need to capture all the metros to get decent numbers but i still don't think selling high end bikes only would be able to make the showroom profitable ever.

anyway - back to the original topic - is the bangalore dealership actually closing down? did you get the deposit back?