Piaggio moves into new phase of globalisation with Baramati plant

Two days after the press launch in Mumbai, the official opening of the new Piaggio Group factory in Baramati in Maharashtra to produce Vespa scooters for the Indian market took place on April 28. The integrated vehicle and engine plant has been completed in a record time of 12 months from concept to commissioning and start of production.

The plant inauguration ceremony was attended by SharadPawar, Union minister for Agriculture and Cooperation; Praful Patel, Union minister for Heavy Industry and Public Enterprises; AjitPawar, deputy chief minister, Maharashtra; SupriyaSule, Member of Parliament, LokSabha; and the Italian ambassador to India, GiacomoSanfelice di Monteforte. Piaggio Group chairman and CEO Roberto Colaninno headed a delegation of Piaggio senior management, including Piaggio Group deputy chairman MatteoColaninno and Ravi Chopra, CMD of the Indian subsidiary Piaggio Vehicles.

Speaking at the event, Roberto Colaninno said: “With its entry into the Indian market, the Vespa becomes a truly global vehicle, targeting a new class of young, highly educated Indian consumers. This is one of the reasons why the launch of the Vespa in India – a country with extraordinary potential – coincides with a completely new phase in our Group’s globalisation strategy: focus on the end customer in every major market where the Piaggio Group operates, attention to the specific market needs and requirements, product marketing and technical development geared to delivering state-of-the-art products in every market. Only with this approach can we maximise the success of our best-known brands and develop innovative new product ranges.”

Ravi Chopra, CMD, Piaggio Vehicles (India) said: "Piaggio begins a new chapter of growth in India. The operations have begun with 100 percent localisation of components, in tune with the Piaggio strategy.”

Third Piaggio plant in Baramati

The Vespa production plant is the third factory set up by the Piaggio Group in Baramati. The area is home to the manufacturing complex of Piaggio Vehicles, which already produces three-wheeled goods and passenger vehicles and, in an adjoining facility, scooter engines for the Vespa, and diesel and turbo-diesel engines for the commercial vehicle ranges produced by Piaggio in India and in Italy, in Pontedera.

With the opening of the Vespa production plant, the Piaggio Group industrial complex in Baramati now provides jobs for approximately 3,000 workers. The new Vespa factory is spread over 150,000 square metres, including a covered surface area of 32,000 square metres. It handles the full Vespa machining cycle, from welding of the monocoques to varnishing and final assembly. The initial production capacity of the plant, which was built in just 12 months, is 150,000 scooters per annum; capacity will be raised to 300,000 units during 2013 as part of the Piaggio Group industrial and commercial programme.

Made-for-IndiaVespa LX125 scooter

The Indian two-wheeler market is the world’s second largest in terms of deliveries, with approximately 13 million vehicles sold in 2011. The scooter segment – with more than 2.5 million vehicles sold last year – is the most dynamic segment of the market, with strong annual growth rates of more than 20 percent.

The Vespa LX125 developed for the Indian market is based on the Vespa LX, which in 2011 was the best-seller in the European two-wheeler market and the top-selling European two-wheeler in the USA.

Compared with the version produced in Italy and marketed in Europe and the USA, and the model produced by Piaggio Vietnam, the Indian Vespa features a number of specific ergonomic adaptations, offers easier access to the engine and tyres, and is equipped with a brand new 125cc four-stroke, three-valve engine.

The Piaggio Group says this completely new motor was developed specifically for its debut in the Indian two-wheeler market: a state-of-the-art, no-noise, eco-friendly unit with significantly low exhaust and noise emissions, and exceptional fuel efficiency.

The Vespa LX125 is priced at a hefty Rs 66,600 (ex-showroom, Pune) and will be sold in 35 Indian cities, through a distribution network comprising 50 exclusive dealers dedicated entirely to the Vespa brand. This, however, could prove to be difficult as the sticker price is a massive premium over many established Indian rivals like the popular Honda Activa, Suzuki Access and Mahindra Duro.

Emerging market strategy banks on growth in Asia

Entry into the Indian two-wheeler market is a fundamental step in the Piaggio Group strategy which targets strong growth on the emerging markets. The Group is projecting global sales of more than one million vehicles in 2014 and significant growth in revenue, with a consolidated net sales target of approximately 2 billion euros for fiscal year 2014. In terms of revenue breakdown, in 2014 the Piaggio Group expects Asia to account for 50 percent of revenues, compared with 8 percent in 2003 and 25 percent in 2009. In 2011 the Piaggio Group shipped a total of 653,300 vehicles worldwide (a 4.0 percent increase on 628,400 vehicles sold in 2010), of which 415,000 comprised two-wheelers (scooters and motorcycles) and 238,300 three- and four-wheel commercial vehicles.

In 2011, the Group reported consolidated net sales of 1,516.5 million euros (+2.1 percent from 2010), EBITDA of 200.6 million euro (+1.7 percent on 2010), net profit of 47 million euro (+9.8 percent from 2010). Net debt as on December 31, 2011 was down to 335.9 million euros. During 2011, the Piaggio Group increased capital expenditure significantly – especially for the development of industrial operations inthe emerging countries – to a total of 126.1 million euros, a rise of 31.1 percent from 96.2 million euro in 2010. Of the total investments, 38.3 million euros were in research and development.

INTERVIEW WITH RAVI CHOPRA, CMD, PIAGGIO VEHICLES (INDIA)



At Rs 66,000, many feel that the Vespa LX125 is overpriced, given that it is a 100 percent localised product. Won’t that be a disadvantage for it to compete with other scooter brands in India?

We feel that the Vespa brand can command that kind of pricing. It is an iconic brand.

Will Piaggio’s India plant be used as an export hub also?

We feel that the domestic demand will keep us busy enough initially. We are confident of it, which is why we plan to double the production capacity to 300,000 units in 2013.

How many vendors are part of the LX125 project?

Around eighty. Forty of them are exclusive to the LX125, while the rest are common with our other operations.

What has been the response to the LX125 so far?

We have received 15,000 enquiries and 2,000 bookings so far. As you know, we launched the plant on April 28. Some dealers started operating only from May. At present, our dealership network is 50 dealers in 35 cities, which cover 65 percent of the market. We will expand the network further.

What is Piaggio’s plan regarding expanding its two-wheeler portfolio in India? When can we expect the next product?

India is the second largest market in the world for two-wheelers. For Piaggio, India is a significant destination in its growth plans. Furthermore, Piaggio has a wealth of technology and a broad brand portfolio.

The Indian subsidiary is currently evaluating the feasibility for the most appropriate products that could be added to the range.

SUMANTRA BAROOAH