Things aren't as good as they once were. At least, that's the case for KTM's parent company Pierer Mobility AG.
After years of growth, much of which was spurned on by the need to be outside during the COVID-19 pandemic, high interest rates and some economic chaos throughout the world has led to a serious decrease in sales. And that's led the group to take some serious measures to course-correct, which includes cutting part of its workforce, bigger incentives, and moving more of its production to China and India.
According to Pierer, sales have "slowed significantly," in the last year. So much so that the company's sales projections for the year are likely to fall considerably short. "Due to the latest interest rate decisions in the USA, interest rates are expected to remain high, which will have a negative impact on sales expectations for the American market," says Pierer in a statement issued earlier this month, adding, "Sales figures in Europe are also still volatile."
How much so? In Pierer's estimation, between 10-15% short. Woof.
But, honestly, that probably should've be expected given 2024 is an election year. For those outside the United States, big ticket purchases tend to slow during election years, as markets are more chaotic, as is what the future holds in terms of who gets into office. Taxes could increase or decrease, pay could sharply decline, and interest rates are all over the place as each party jockeys for votes. As such, cars, motorcycles, and other powersport purchases tend to be put on hold until everything calms the hell down.
Pierer, however, is taking this more seriously and included in projecting fewer sales this year, the company also stated that it would reduce its workforce.
"With the growth in sales figures over the last ten years, the number of employees at the motorbike subsidiary KTM AG has more than doubled," the company said in a statement, adding, "In view of the changed location and market situation, the number of employees has now had to be adjusted. This reduction in personnel after years of rising employment is painful, but necessary in order to maintain and secure the competitiveness of the production site."
Additionally, Pierer stated that to better reduce dealer stock, which is starting to pile up across its network, incentives would be put across the board on both its motorcycles, accessories, and its bicycles. Likewise, Pierer would offer better extended payment terms throughout to make things more competitive.
But that's not all.
Pierer mentions that production costs have been increasing throughout the last few years, specifically citing "high wage settlements and increasing costs in connection with regulations and bureaucracy." And, with the cost of producing its motorcycles going up, it's become less and less competitive with the rest of the market.
So not only will the company be cutting jobs, it's looking into moving more of its production to markets like China and India, as Pierer will "[utilize] the favorable economic conditions in these regions to secure its competitiveness."
Now, I'm not too sure I believe that reasoning, as the brand's offerings are similarly priced to many others within the space. And, as it said throughout these statements, this downturn follows years of great growth. The Group made tons of money off its motorcycles and bicycles. People were buying the company's offerings in droves.
They just aren't right now.
If I were looking outside in, I'd likely point more at shareholder profits not exceeding what they'd like to see as more of a cause for these belt-tightening and austerity measures compared to just lackluster sales, worldwide regulations, and cost of labor going up. Though that's just my own personal speculation.
We'll have to wait and see what the cards bring for Pierer in the rest of the year and whether or not it bounces back after this election year.
