Audi and Ducati: A perfect fit?

Just over a month ago, after weeks of speculation, premium car giant Audi bought Italian motorcycle manufacturer Ducati. It paid just over £700m (Rs 6,023 crore) for the company, although it is also thought that Audi had to take on Ducati’s estimated debts of £150m (Rs 1,290 crore). The Italian company makes a modest profit, thought to be around £41m (Rs 352 crore) last year. Ducati becomes the 12th brand in the huge VW Group, a combine that now runs from premium motorbikes to huge MAN and Scania trucks.

With sales of just 40,000 bikes each year, Ducati is a minnow in the two-wheeler world, although it does have a global presence and brand image. It also has the advantage of a sporting reputation that is second to none, with 13 of the World Superbike Championship winners since 1988 riding Ducati models. Ducati’s most modern incarnation (the brand has been owned by five different companies) is also known for its cutting-edge design and styling. However, industry commentators and analysts have virtually all come to the same conclusion: this was a vanity purchase by a cash-rich VW Group.

Ferdinand Piech, the all-powerful boss of Volkswagen, is quoted as saying he wished VW had bought a near-dead Ducati in 1985 when it was put up for sale by engine maker VM. Piech is thought to have long harboured the desire to own a motorcycle brand. Ducati has been absorbed into Audi’s control, but there’s no doubt that it was Piech who gave the green light to the deal. In fact, the purchase of Ducati falls into the same category as VW’s purchases of Lamborghini, Bentley and Bugatti. Not quite a vanity project, but a brand with an image disproportionate to its annual factory output. It is certain that VW’s immense engineering power will enable future Ducati models to be a big leap over the current range. Big improvements in production technology and purchasing power will almost certainly make the company more profitable.

In the other direction, there have been suggestions that there could be some knowledge transfer from Ducati to Audi in terms of lightweight spaceframe design, or from Ducati’s small, very high-revving engines, which use the unusual desmodromic valve actuation (which doesn’t use springs as a closing mechanism). In truth, such synergies are highly unlikely.

Official justification for the deal has come from Audi boss Rupert Stadler. He has simply been quoted as saying that “as a sporty, global, premium brand, Ducati is an excellent fit for Audi”. Andrea Bonomi, chairman of Investindustrial (which owned Ducati, along with BS Investimenti and, improbably, the Hospitals of Ontario Pension Plan), says, “We believe Audi is the best partner to continue the process of globalisation that is already under way.”

Hard-nosed industry analysts, however, remain unimpressed. According to press reports, Arndt Ellinghorst of Credit Suisse thinks the purchase is “driven by VW’s passion for nameplates rather than any industrial or financial logic”. Stefan Bratzel, of the Automotive Centre at the University of Bergisch-Gladbach, was quoted as saying, “I can’t think of a concrete reason for Audi to warrant a business case for buying Ducati. It does not enhance Audi’s business model in any way. It’s just a trophy in the wall cabinet.”

Across the board, the industry reaction to the purchase of Ducati has ranged from passing interest to borderline hostility. In these times of global austerity, flashing so much cash seems, on the part of VW, either triumphal or plain vulgar.

However, there is the possibility, as slim as it might seem, that the purchase of Ducati might serve a longer-term strategic function for the VW Group. Established premium carmakers are becoming increasingly interested in ‘mega-city’ mobility. As the majority of the world’s population moves into cities, using personal transport will be ever more difficult due to population densities, pollution concerns and congestion controls. Futurologists are also hinting that young people brought up with environmental politics to the fore may not even learn to drive.

The upshot is a flurry of alternative mega-city transport concepts, including Audi’s own electric Urban Concept and recently revealed electric bicycle. A new report from Pike Research predicts that between 2012 and 2018, 382 million electric two-wheelers will be sold in the Asia-Pacific region, with 92 percent sold into China. Sales of conventional scooters are also booming in the area. Not even the European carmakers can ignore the Asia-Pacific region’s extraordinary two-wheeler boom. Indeed, BMW is just rolling out its new, upmarket C-series scooters and is promising an electric-powered version. Vespa has just launched in India and Yamaha is building a new two-wheeler plant in India, where it expects sales to rise to 20 million a year from today’s 13 million. Smart and Mini have also shown scooter concepts in recent years.

The VW Group cannot be left behind in the race to establish a premium scooter market among the brand-conscious youth in Asia’s mega-cities. Could Ducati return to its post-war roots (it started out by making the Cucciolo bicycle/scooter hybrid) and be used to spearhead VW’s entry into the market? Considering the way VW has handled Bugatti, Lamborghini and Bentley (none of which makes more than 7,000 cars a year), it is most likely that Ducati will remain on its present niche course. But VW bosses can’t have missed the huge Asian two-wheeler boom.

The opportunity to turn Ducati from a billion-pound bauble into the maker of premium two-wheeled mega-city transport does not look immediately likely, but neither is it as far-fetched as it first seems. After all, what sounds more convincing: a premium scooter from Ducati or one from Audi? And who can ignore 65 million annual electric scooter sales in Asia-Pacific alone?

HILTON HOLLOWAY, AUTOCAR UK