Piaggio & C. S.p.A, the Italian two- and three-wheeler major, has dropped plans to manufacture two-wheelers in India, and will focus on manufacturing only three- and four-wheelers here, Piaggio chief executive officer Rocco Sabelli said on Friday.
Sabelli told Business Standard that its New Delhi-based wholly owned subsidiary, Piaggio India Ltd, set up to manufacture two-wheelers, had been merged with Piaggio Vehicles Pvt Ltd on November 4, 2003.
The Surajpur plant would be used to assemble three-wheelers, Enrico Dell'Artino, senior vice-president, light transportation vehicles division, added.
This wholly-owned subsidiary currently has a manufacturing unit in Baramati in Maharashtra to produce three-wheelers and four-wheelers.
In October 2002, Piaggio India head Ugo Lanfranchi had told Business Standard that the two-wheeler plans had been kept under suspension.
Today, Sabelli said: "Where is the place for us in this market. I do not see a prospect for two-wheelers for us in India. We will instead focus completely on three and four wheeler manufacturing."
The company had planned to invest $100 million for the two-wheeler project. But will now invest part of that proposed investment to develop the Surajpur site.
"In six months time, we will invest some money in setting up the infrastructure for an assembly line," Dell'Artino added.
Piaggio had acquired the Surajpur factory from the Anand group of industries for an undisclosed sum.
The plant and machinery which did not jell with the manufacturing business of Piaggio were not part of the deal.
So far, Piaggio has invested only in refurbishing the plant by building a roof and putting up a boundary wall.
Piaggio had quit a two-wheeler manufacturing joint venture, set up with Kanpur-based LML a few years ago, after a dispute over management.
During those days, LML was a major manufacturer of the Vespa scooter, and was second to Bajaj in terms of the two-wheeler market volumes.
Since then, the demand for scooters has been on the decline, while the motorcycle has emerged a bestseller.
The two-wheeler market is crowded with strong players like Hero Honda, Bajaj, TVS, LML, Honda, Kinetic and Eicher-Royal Enfield Motors.
Piaggio's market research in recent times has shown that it may not be feasible at this point in time to invest in a manufacturing facility since it will be extremely difficult to take on these players. Moreover, Piaggio's strength lies in scooters and not motorcycles.
Instead, Piaggio has been constantly investing in the Baramati plant. The plant manufactures three-wheelers and is gearing up for the launch of a four-wheeled light transport vehicle, based on the three-wheeler platform, in 2004-05.
The product called the quadricycle will be launched in Europe in September 2004, Sabelli said.
The capacity of the Baramati plant is being increased to 100,000 units with an additional investment of Rs 100 crore (Rs 1 billion). It will launch another three products next year, executives added.
Piaggio also plans to export euro 10 million worth of components from India.
The road ahead