KTM Addresses Financial Losses, Quality Issues & Plans For Redemption
The Austrian brand opens up about their current situation and challenges.
After years of impressive gains, KTM and its parent company Pierer Mobility AG, which also owns Husqvarna, GasGas and a majority stake in MV Agusta, is in damage control mode after mid-year financial reporting revealed sharp declines in profitability. In a recent news release the company acknowledged that its motorcycle sales had fallen by 27 percent during the first half of 2024 compared to the first half of 2023, while its bicycle sales plummeted by 36 percent.
The news release cited some surface reasons for the tumult, including market instability in the North America and Europe as well as a drag caused by huge losses on Pierer’s bicycle endeavors, a segment which along with motorcycles, boomed so wildly during Covid it sparked huge upswings in production that would eventually lead to oversupply issues.
While the numbers certainly look bleak, the Pierer Group’s founder and CEO Stefan Pierer and his newly-appointed “co-CEO,” financial expert Gottfried Neumeister, aren’t dwelling on excuses, instead promoting that their motorcycle division will be only slightly in the red or even balanced by the second half of 2024.
How does Team Orange make it back in the black? An interview with Pierer board member Hubert Trunkenpolz published by Germany’s Motorrad lays out what he sees as the company’s strategy.
Firstly, Trunkenpolz wants everyone to know that while he’s not happy, he’s also not worried. When asked how the high-flying company lost so much altitude in the first two quarters of 2024, he doubled down on Covid as the central cause. “Corona came and with it a huge demand for two-wheelers,” says Trunkenpolz, noting how the initial problem was the urgency of getting enough product to market, an endeavor made difficult and costly because of erratic supply chains.
Of course we all had a front seat for the wild ride that was The Pandemic and saw first hand how the demand for quarantine-friendly recreational items like motorcycles, bicycles and RVs exploded, and even though most people also had surplus of cash, they were often met with empty lots and showrooms.
It’s easy to see how manufacturers could read the boom as a new appreciation for these items that might translate into sustained demand, but of course we also know that wasn’t the case, and the heightened production only caught up as demand began to ebb. After Covid, Trunkenpolz says the supply chains were working again and products were being delivered but in the face of falling demand “a situation arose that I would describe as quite dramatic in terms of inventory.”
So, suddenly there’s a lot of product at the showrooms, motorcycles that were more expensive than normal to build, but fewer buyers as we all went back to busy schedules and despite discounts, felt pinched as post-pandemic inflation kicked in.
This unforeseen pandemic-induced pendulum swing had a negative impact on Pierer’s margins of course as it had to absorb the consumer discounts while trying to float dealers who were facing exorbitant finance costs, especially in the US. Trunkenpolz did note on this topic that Pierer feels fortunate it is secure enough to manage this crisis and assures that none of the company’s brands are “even remotely at risk.”
As you’d expect, “restructuring” is a big part of Pierer’s plan as it tries to bring supply and demand back into balance, and the first order of business will be cutting production by a quarter during the second half of 2024.
Pierer is also doing value adjustments for future bicycle production, noting that it was the downturn in this sector that made the company’s overall loss report look so dire. Going forward with bicycles, Pierer says it will only focus on the premium segment of that market.
With dialed back production comes an obvious threat to jobs and there have already been layoffs across the Pierer brands, including 373 jobs lost at KTM in the first two quarters of 2024, with an additional 200 layoffs slated for September, something Trunkenpolz says the company deeply and seriously regrets, assuring the layoffs in September will be the last in the process, leaving what he believes is a sustainable workforce of around 5,000 employees.
Another factor in evening out supply and demand will be a push to sell the excess motorcycles currently loitering on showroom floors, and that includes, for the time being, continuing discounts and financing incentives, despite their initial negative impact. “Discounts are not good for dealers, they are not good for us, but above all they are not good for our brands. We would have loved to avoid that, but the motorcycles have to go somewhere.”
As you’d guess dealers can’t be happy with the situation and Pierer hopes to help by extending payment terms, supporting what Trunkenpolz calls “the commercial backbone of our business model” in every way possible.
In this interview an interesting question arose regarding customer and dealer complaints regarding product quality, a flashpoint of late, though Trunkenpolz dove right in admitting that quality problems did arise during Corona-induced overproduction and parts supply issues, which caused nearly complete units to be taken off the production line and stored until the parts arrived, then moved back into production. “A motorcycle that is assembled like this ends up in the warranty statistics 90 percent of the time,” he admits.
That is a shocking percentage of course and not great news for consumers who purchased pandemic builds. Trunkenpolz revealed that the plant in Mattighofen, Austria, is now back running at the capacity it was designed for, building 160,000 to 170,000 units per year rather than 200,000-plus machines it was churning out to meet imagined demand. With this adjustment, he believes the product can return to its highest standard of quality.
While these answers might calm shareholders, there is likely to be more blowback from consumers, many of whom are already turned off by a rash of cam shaft failures on 790 and 890 LC8c engines. The fact that Pierer keeps becoming ever more entwined with China’s CFMoto is also driving consumer skepticism.
On the topic of cooperation with China, trading manufacturing duties and technology, as well as partnering on the retail front, Trunkenpolz says it’s only natural that European manufacturers work with China, which he says is driving the market, each year taking more and more of the pie. “We preferred to have [CFMoto] as a partner rather than a competitor.”
And it sounds like Pierer is only going to get more involved with its overseas partners, at least in the pursuit of electrification, technology China most definitely has a jump on. So yes, he says Pierer’s brands have been producing small displacement models at partner Bajaj in India for a long time, as well as producing part of its “medium series” at CFMoto in China for the past seven years, but he wants the world to know 100 percent of concept development for all products still takes place in Austria, and all competition products and bikes over 990cc are built there as well. “That is set in stone!”
One of the last questions Motorrad asked Trunkenpolz is perhaps the most important: How does he see Pierer protecting the image of KTM in the midst of quality issues and financial downgrades. “By remembering our old strengths,” he said. “We damaged the KTM brand with overproduction and quality problems and now we have to iron that out.”
From Pierer’s perspective, KTM needs to concentrate on regaining the essence that made the brand so popular in the first place, something Trunkenpolz equates with the brand’s famous “Ready to Race” slogan, as he mentions how KTM, Husqvarna and GasGas will now be segregated in their pursuits, for example, GasGas in entry-level motocross and enduro while KTM returns to AMA Supercross and MotoGP. There was no mention if the brands would continue to overlap at Dakar.
As consumers, you and I know it takes more than podium finishes to keep us coming back to the Pierer brands, but if all the aforementioned adjustments come to fruition, it is certain to impact future quality as much or more as Pierer’s own profitability. And that’s important. Because in the end, a motorcycle brand, no matter how big, is only as valuable as a consumer’s desire to own it.
Photos by KTM
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Great overview of the situation Jamie!
Hope also that their CEO doesn’t think the strategy of either the “a la carte” sales or worst, a subscription is a path for profitability! I had already kept KTM out of my radar due to this! Here is U.S we already have to haggle for price purchasing a motorcycle. Now for the “packages” after the trial period ends.
I think you’re looking at it the wrong way. Many manufacturers make you pay for the most performance/off road oriented ride modes. BMW do the same thing for example. The difference with ktm is that they let the customer at least try it for free so they can decide if they want it. I know it sucks, but at the end of the day the bike is available cheaper to those who don’t want it. I mean Windows, adobe, etc charge for their software too. And it’s not a subscription…but I agree a subscription would suck and would likely just piss even more people off. As for haggling over price, that’s the dealer you’re haggling with. Ktm still charges the dealer the same for the bike. Here in Norway we pretty much only get a discount if ktm puts the bike on sale.i couldn’t even get heated grips included with my 1090R or 89advR for free.
Oh and the bikes cost like 30-40% more here too.
For the same price( here at least) you can get a t7 world raid which doesn’t include cruise control, quickshifter, cornering abs etc. the Ducati deserve x doesn’t even come witha rear rack of any sort nor does the 1300GS. Ktm really are offering a lot of bike for the money in the 790/890R. At least they would be if they didn’t have reliability issues.
Not to mention ktm have screwed so many people by rejecting warranty claims that many more people no longer trust them their bikes.
As a victim of the cam failure debacle on my 790R, I am one and done with KTM. No more $$ from me!
Checkout KTM – CHEESE CAMS ISSUE by Dirty Garage Guy
Looks like we’ll need new cams AND HEADS!!! Misaligned drilling if oil feed tubes!!!!!!
Awww poor KTM. These fools sent my dealership 1 990 and 1 1390 for the season!!!!! Now they are crying about sales! Want to sell more??? Build them!
Well, as someone who has bought three new KTMs – a 1290 SA in 2017, a 790 Adventure R in 2019 and a 350 EXCF 6-Days in 2023, I’ve had my fill!
My 1290SA was flawless
The 790R is “at possible risk of camshaft failure”
The 350 6-Days did 58 minutes of runtime before costing me €600 to repair from a failed engine crank sensor
Now I see KTMs are going to be Chinese made, Pierer Mobility can GTFO
I will not pay Austrian prices for the CF Moto CCP controlled sweatshop made machines cobbled together by people on the assembly line that have zero passion for what they (are often forced to) do for a living
Nice try KTM, your sales were down and Yamaha (T7) sales were up..
In fact most non KTM dealers will not trade in an LC8c engined bike due to the sh!tstorm with the cam failures and KTM’s very poor initial response and KTM’s PR spin doctors’ jaded response to this issue
Give any company that is driven by passion to a investor appeasing, money obsessed holding company and they will eventually drag the brand down then foolishly pay off their countrymen to enrich a brutal and despotic nation (Communist China) solely to appease shareholders
These people do not care about the brand, the quality or the heritage, thy are greedy and ruthless business people
The LC8 is not the engines with cam oiling problems its the CF Moto manufacturered Parallel Twin.
Both Generations of LC8 (1st gen 950/990 and 2nd gen 1090/1190/1290) are 75° V-Twins that have a roven reliability record. Not to suggest that they aren’t being manufactured by CF Moto currently bu
I’ll never buy one of their bikes. They’re making junk and have been doing so for too long – even before covid. They have terrible customer support too. The horror stories are too numerous to ignore. They can offer all the discounts they want on new bikes. KTM is now the face of highway robbery and snake oil – which is likely what they put in their bikes.
Yes, it seems as if 2019/2020 was the end of the quality KTM was know for.
I would never buy any motorcycle made in China, no matter who designed it or what name it carries.
I bought a Husqvarna Norden 901 last year and have been really impressed with it. I did scout for a year old, leftover and struck a great deal. Having owned more than 100 motorbikes and having ridden for 50+ years I can say that this Husqvarna has changed what I thought was possible in my riding. I can load “Nord” with fly fishing gear, camping supplies, food, tools, enough for 8 days in the woods and still easily ride terrain that I ride unloaded on my DRZ, incredible. The misgivings I have about Pierers tie-up with CFMoto going forward may effect future purchase choices, as others have noted, premium price for historically spotty Chinese quality is tough to swallow. For the near future these price adjustments will insure a fine selection of cheap used bikes to choose from for years, after I destroy this one.
How can they blame COVID still, people have not just stopped purchasing bikes after COVID, I do not see any responsibility on their part but instead shift the blame towards consumers behaviours, well perhaps they should be looking at their marketing strategy team to see why they have been sleeping over consumer trends in the past 3 years. The lowest spec models such as Duke and RC 125cc cost £4800, this is a lot of money for this end of the market and would be considered a luxury item given power to price ratio, also this is the end of the market for new riders many of which would think twice about how they are going to spend 5K, this is not good value at all, KTM could win this race to the top by simply lowering their prices permanently compared to the rivals instead of trying to match them.
Nice article Jaime!
MV was a big mistake didn’t anyone read the news about the beaten Harley Davidson took a while back. And if you continue to build more of your products out of Austria those numbers will continue to fall.
This is simple.marh. ugly bikes. Poor quality. Equals not much consumer interest.
Take your product back from the Chinese and India!
Your CF Moto products(790/890/990) showed a lack of quality control and warranty issues immediately upon their release.
I’ve owned 1 LC8 1st gen 990 Adv, 2015 2nd gen LC8 1290 Super Adventure both totally reliable and long lived. My 2011 XCW 450 was equally as reliable and trouble free. I purchased a 22 890 R . The lack of the traditional KTM performance was there but brakes, clutch, and electronics were problematic from the beginning. Traded the junk off with less than 2000 miles. Next owner sufferd cam failure. The 2023 1290 SA S that replaced it has had several issues with electronics related to suspension.
The Austrian products were great…..the China/India stuff, not so much.
BTW,
2 months waiting for a sensor for the rear suspension and they claim its still another month out.
My next adventure bike will probably be a Yamaha Tenere.
They forgot who their customers were by going primary race focused. Trail/Endura riders switching to Beta and Sherco. They took they other to great names in trail and enduro and ruined them as well…
It’s a Chinese company now.
BMW sources the engines for 2024 BMW 900 GS from Loncin. It’s called globalisation.
What its called is garbage because of the dismal quality control!
KTM’s problem is not a 2020 pandemic or higher interest rates; all bike makers faced that. KTM’s problem is their poor quality control and terrible customer service. The fact that they STILL aren’t facing their stumbles honestly and forthrightly is why motorcycle customers are turning away from their products and their sales are plummeting.
I have a 1290 SuperDuke GT. I love it. It has 50,000kms on it and it goes like stink!! I have had NO reliability issues except for the fuel pump at about 45,000kms. I WAS looking to buy a new 1390 GT when they are released soon. After seeing the way that KTM have handled the camshaft issues on 790/890 motors I have decided that I will NEVER buy another KTM. I have had several other KTM’s before and I have always been a KTM fan BUT this latest issue is appalling. They have lost me forever.
They used to be one of the few games in town in the dual sport market. Now everyone and their brother has gotten in on the game since the T7 took the market by storm. People have more choices that are generally more reliable and less expensive. The market has caught up with KTM.
We have 3 KTMs in our garage (including a 790) and I am very worried, Just looking at the new/used LC8 prices here plummeting… OMG! Mr New guy – Change the slogan to “Race Ready Reliable” and offer a 7 year 100,000km warranty on all motors in KTM twins, no questions asked, retrospective.
I could almost chalk up the cam lobe issues with my 2020 790R to whatever excuse KTM wants to use, but the way KTM treated me as a customer, I can not get passed, not to mention having to wait 6 months just for parts to arrive.
KTM should hire the current CEO of Harley Davison. Problem solved.
I cant wrap my head around a manufacturer stating that when a moto build is pulled off the line to wait for parts, theres a 90% chance it’ll have mechanical issues, and STILL DOING IT?!?!
There has to be a better work around then sending out your product to the world knowing 90% of them will fail.
KTM fact check….Global Motorcycles Industry keeps growing in 2024. After the first six months, the global sales of scooter, moped and motorcycles have been 32.7 million (+5.1%)……..as reported by Motorcycle Data….. 08/2024
>https://www.motorcyclesdata.com/2024/08/10/world-motorcycles-market/ <
This is fact! Interest is higher than its ever been for motorcycles.
Denying the fact and trying to smokescreen or hide form the reality is continued folly form arrogant individuals who have lost their moral compass and common sense that help build their brand!
I agree 100% with the other comments from Matt, Pabaker, etc,etc., that poor quality products coupled with poor customer service and denial of warranty related claims is what’s driving KTM’s sales down by the reported 27%….especially in North America, where we have the buying power as individual consumers and the intelligence to research expensive purchases.
It’s a no brainer but these Board members and the CEO can’t step up and face the music, which is in turn turning off consumers shopping for an experience with a quality motorcycle. I waited in 2021 and am very glad I did for the 790 adv, after reading many different new owners discovering numerous issues with their new KTM….I purchased this spring and have been very nervous ever since and now at 10,000km getting more nervous each ride as my 890adv r ages toward the problem period of discovery previously reported by many model owners…just the sound of the engine which is like a bag of marbles inside a food blender is enough to draw pure terror into my eyes.dealer stated “they all sound like that”…….great!
To wit, depending upon how I am treated, if any issues do occur under my 2 year warranty, will most definitely under take a very vigorous class action law suit against the manufacture, executive board and dealerships should customer service not be displayed fairly.
Instead of laying off 100’s in the mother factory in Austria-how about laying off those Chinese employees and building those bikes back in Austria?
Sell off the money bleeding bicycle division. DA!
Gary, he just hired an accountant as his co-CEO. How has that worked for Boeing? Every accountant knows that the path to business success is cutting costs, not a better product. Once the accountants get control, it’s all downhill.
richie.d.lee@gmail.com I have had about 18 KTM, husky and gas gas bikes over the last 40 years of riding off road. I would never buy another and would advise anyone to stay away from them after my KTM 250 excf destroyed itself because of a plastic gear driving the oil pumps. It was always looked after and the fact they knew there was an issue with them and modified the part but never told new owners there was an issue.
I have a degree in aeronautical engineering and went on to run a specialist NDT plant for the m.o.d. I’ve built race engines and suspension for race teams ,told them what the issue was and yet they still said they may not warranty it after a shop looked at it. They stated the shop would have to pull it apart at over £100 an hour and then would cide if I would have to pay or them. Being retired now I couldn’t afford to take the risk of having to pay 100s in labour just for them to say no!
KTM used to be a great brand with great specialist shops selling their Mx and enduro models. Not now they closed down all the dealerships that got them into the limelight, ditching them for shiny showrooms and dealers that don’t know the product inside out.
Hundreds of people had destroyed engines from that oil pump gear and they know that. Same with the chocolate cam shafts.
Shame on you KTM for your hopeless warranty department and after sales.
Hubert Trunkenpolz fajne nazwisko. Czy to czasem nie znaczy “Pijani Polacy”. Jego dziadek chyba bywał w Polsce w dawnych czasach i widział ile alko się przelewa w Polsce. Dajcie znać jeśli się mylę.
Hubert Trunkenpolz is a cool name. Doesn’t it mean “Drunk Poles”? His grandfather must have been to Poland in the old days and saw how much alcohol flows in Poland. Let me know if I’m wrong.