Over the last few years, things have looked pretty rosy for Pierer Mobility (Pierer), the powered two-wheeler conglomerate. Pierer owns or partially owns the brands KTM, Husqvarna, GasGas, MV Agusta, CF Moto, Husqvarna E-Bicycles, GasGas E-bicycles, and the suspension house WP. That’s a powerhouse lineup of brands that, up until now, were on a “roll” (pun intended, sorry).
However, as Pierer gets deeper into 2024, they have seen fit to alert investors that the upward arrows for sales and profit are coming to an end, for now. They recently issued an alert to investors, letting them know that 2024 is going to be different—significantly different. They quote a number of reasons for the slide, and interestingly, one of their “growth” product lines is the area where Pierer sees the most decline in 2024. And that product line is not motorcycles. Ready for it? It’s their electrically powered bicycles that are the biggest source of their financial concerns. But let’s take a look at the overall picture.
Tougher global conditions
In its updated 2024 investor guidance, Pierer came right out and said:
“In the current financial year, momentum in PIERER Mobility’s core motorbike markets in the USA and Europe has slowed significantly.”
Adding a bit more detail, Pierer reports:
“Overall, PIERER Mobility’s sales figures will fall short of expectations this year after three years of above-average success.”
High interest rates in the USA and the reported volatility of the European market are blamed for affecting their brands’ sales. Pierer also says that they are not alone in this conundrum. Their recent guidance says that dealers are caught in the middle with slower sales, tying up a lot of their capital. As a result, they say that they will need to help dealers with extended payment terms and higher discounts. Of course, both of these things will affect profit.
“This means that dealers will have to reduce their inventories and thus continue to tie up considerable capital. The PIERER Mobility Group is therefore continuing its efforts to strengthen its dealer structure through extended payment terms and higher discounts. These measures have already led to a sharp increase in working capital in the past financial year. Management expects working capital and the associated capital commitment to remain high in 2024. This is expected to have a significant negative impact on EBIT and the financial result in the current financial year.”
Pierer Mobility is warning investors sales will be down for 2024. Image: Pierer Mobility
Workforce reductions
Pierer hopes to substantially offset these issues with cost reductions and corporate restructuring. As is usual for large corporations, cost reductions come in many forms, one of which is a reduction(s) in workforce(s). Pierer says motorcycle production costs in Europe have risen “…due to high wage settlements and increasing costs in connection with regulations and bureaucracy putting a strain on competitiveness.”
“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. 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.”
More motorcycles produced offshore
Perhaps of more concern to motorcycle riders is the fact that motorcycle production in Austria has already been significantly reduced as a further cost-cutting measure. That potentially means that fewer Pierer brand motorcycles will be produced in Austria and moved offshore. Pierer already has a partnership with CFMOTO and Bajaj, so it looks like more of the brands’ motorcycles will be built in China, India, or other low-cost manufacturing countries. They make this clear by saying:
“Another priority in 2024 is to increase efficiency in product development. The focus will be on aligning and prioritizing activities in line with the Group’s premium brand strategy and streamlining development processes. Following on from this, joint research and development with the strategic partner Bajaj Auto in India and the JV partner CFMOTO in China will be expanded at the respective locations.”
“Due to the increasingly fragile supplier industry in Europe, the PIERER Mobility Group is utilizing the favorable economic conditions in these regions to secure its competitiveness. An efficient and high-quality supplier industry is being established there.”
Pierer says more of its motorcycles will have to be produced offshore. Image: Pierer Mobility
This is an interesting move, particularly since they are stating straight out that more Pierer motorcycles will be produced offshore. Could the move strain their ability to retain their “premium” brand status? That’s quite an interesting question since European manufacture is one of the cachets of Pierer’s brands.
Pierer Mobility’s E-bicycle financial outlook
While things on the motorcycle front are not so good, the news is even worse for Pierer’s bicycle segments. They claim that recent sales of bicycles were driven by the pandemic, which led to “…overheating in the bicycle market and disruptions throughout the entire supply chain.” Additionally, they claim that “…massive pressure is being exerted on sales prices,” which translates to reduced prices. Accordingly, Pierer warns investors that “…the extraordinary impairment and restructuring requirements in 2024 will lead to a significantly negative result in the Bicycles segment.”
Pierer Mobility now has only two e-bike divisions: Husqvarna and GasGas. In 2023, they sold Raymon and Felt e-bikes. Photo: Pierer Mobility
How much is “a significantly negative result?” Well, according to the investor guidance, Pierer’s bicycle division will see a “…significantly negative EBIT (earnings before interest and taxes) of €-110 to €-130 ($117 to $145) million for the 2024 financial year…” Even for a company as large as Pierer, that’s a pretty big loss.
What’s the 2024 Pierer financial outlook
Overall, Pierer expects motorcycle and bicycle sales to decline 10 to 15 percent in 2024. In its motorcycle segment, Pierer says cost savings introduced in the current fiscal year will be able to compensate for the negative effects of declining sales. Even with their cost-cutting measures, they expect a flat to slightly positive EBIT. As stated above, the situation for Pierer’s bicycle segments is much more dire, with a significant loss for 2024.
Ultimately, Pierer will go on, but the most interesting question is whether Pierer’s move to produce more motorcycles offshore will affect its brands’ images. Perhaps of less interest to motorcyclists but of more interest to bicyclists is whether Pierer will continue producing electric bicycles. Currently, Pierer’s website shows their Husqvarna and GasGas branded bicycles. In 2023, Pierer sold its Felt and Ramon e-bike brands. So the question is whether Pierer will continue producing e-bicycles, and if they do, how will it affect their “mobility” spin on their products?
Interesting times these…
