At his first media interaction outside Italy, Piaggio Group chairman Roberto Colaninno recently outlined his strategy for expansion in India and the Asian region, at an event in Mumbai. Among the major new initiatives which Colaninno announced were plans to manufacture a new range of 1000cc and 1200cc TDI diesel engines and powertrains in collaboration with Daihatsu at Piaggio’s Indian plant in Baramati.

In addition the company is also looking at a possible entry into the scooters segment with its Vespa Hybrid scooter, which Colaninno said is "being examined for its attractiveness and commercial viability". This would involve setting up a new plant in Baramati to make scooters and petrol engines.

Other initiatives include the possibility of setting up a research and development facility in India, which he said could "take advantage of Indian talent, skill and technical competence".

Piaggio, which is the second largest three-wheeler manufacturer in India, also plans to enhance and intensify its global sourcing from India in order to achieve a high level of cost efficiency. Along with all these moves, there would also be a restructuring of Piaggio globally into three major divisions, namely, corporate, two-wheelers, and three- and four-wheelers.

Piaggio in Asia-Pacific
The group has decided to focus on the Asia-Pacific region, which it feels offers immense growth opportunities, with an immediate focus on India, China, Vietnam and Japan. Its Asian operations are also expected to have an increasing impact on the product pipeline, which comprises two-wheelers (scooters and motorcycles) and three- and four-wheel light transport vehicles (Apé, Quargo and Porter).

China The Piaggio Group constructed a 200,000 units per annum two-wheeler plant in China in 2007. This facility in Foshan is run by the 50:50 joint venture formed in 2004 between Piaggio and the Zongshen Group. Vehicles are produced under the Piaggio brand for distribution in the European market and on a co-branding basis with Zongshen for the Chinese market.

Vietnam In Vietnam, Piaggio has commenced construction of a new facility in Hanoi that is expected to be completed by end-2009. This factory will produce Vespa scooters for the local market. The total investment, for which the Group has established a wholly-owned subsidiary, Piaggio Vietnam Co Ltd, amounts to US$ 25-30 million.

Japan Operations in Japan are conducted through Piaggio Group Japan Corporation, which was set up in January 2008. The objective of this subsidiary was to strengthen Piaggio’s market position in the Japanese market and rationalise the import and distribution of vehicles for all group brands.

Engine pacts
The Piaggio Group recently entered into a new agreement with existing partner Daihatsu of Japan for supply of engines to its light transport vehicle range. This includes the supply of powertrains (including 1300cc petrol engines and transmissions) for the current Piaggio Porter range of light transport vehicles.

In addition, Daihatsu will supply parts, components and assemblies for the new Porter and Quargo ranges, including 1000cc and 1200cc turbo-diesel engines, which would be made at the Baramati plant.

For this purpose, the company plans to spend around Rs 360 crore for the development and production of these twin-cylinder engines, which includes the construction of a new powertrain plant in Baramati. The company has already contacted suppliers regarding parts for the manufacture of these 1 and 1.2-litre engines.

Piaggio has also recently renewed its supply agreement with Greaves-Lombardini by entering into an eight-year contract for the supply of the GL 400 BSII single-cylinder diesel engine that power its Apé range of three-wheelers.

In addition, Greaves will supply Piaggio with the G 435 BS-III single-cylinder diesel engine, from 2010 to coincide with the introduction of Bharat III emissions norms across India.

In addition to these supply agreements with Greaves, the Piaggio Group also has a close partnership with Lombardini-Kohler, which supplies Piaggio India with the 482cc liquid-cooled diesel engine and five-speed gearbox mounted on the Apé Truk four-wheeler.

Piaggio believes its extensive geographical presence in the Asia-Pacific region will accelerate the development of new models and engines for its entire product range. Simultaneously, it is expected to help the Group enhance component and accessory sourcing operations through divisions in Surajpur and Foshan in China.

Foray into two-wheelers
Aside from these initiatives in three- and four wheelers, the Piaggio Group has announced its intention to focus on two-wheeler production and marketing in India.

It says that technological innovation will drive this entry with the development of eco-friendly engines, including hybrids, which would help to deliver low emissions and reduced fuel consumption.

In fact Piaggio has said that it would begin European marketing of thermo-electric hybrid scooters, like the Vespa MP3 Hybrid, at the end of 2008. Its engineers are currently working to lower the cost of this system to make it more commercially viable at the time of launch. The company says this is the world’s first large-scale application of this technology in the scooter industry.

Currently, Piaggio says that it is conducting market analysis to verify the feasibility of the launch of two-, as well as three- and four-wheeler hybrid vehicles in India and expects that this could happen at the end of 2009 or early 2010. Clearly, with all of these new initiatives and expansion plans, the Italian manufacturer is stepping on the accelerator in India. From being viewed as a relatively small part of the Piaggio Group, the Indian operations at Baramati look set to emerge as a critical element of the Group in the coming years.

It will be particularly interesting to see how the foray into hybrid scooters and the plan to manufacture state-of-the-art diesel engines for local and global supply shape up. If these intiatives go according to plan, they are sure to catapult Paiggio to the next level both in India as well as globally.