MUMBAI/CHENNAI TVS Motor Co Ltd(TVSM.NS) and BMW AG's(BMWG.DE) motorcycle division announced a deal on Monday to jointly develop bikes that will give the Indian automaker access to BMW technology as it looks to stem its falling market share.
The long-awaited deal should help TVS revamp a dated product pipeline at the company, which has struggled to compete with a recent ramp-up in activity from Honda Motor Co (7267.T) and Yamaha Motor Co (7272.T) and could also help BMW gain a foothold in the world's second-largest bike market.
"We intend to leverage each other's strengths to deliver a new series of products offering cutting-edge technology for our customers," TVS Chairman Venu Srinivasan said, adding that the products would be released in 2015.
Shares in TVS rose as much as 17.3 percent after the deal was announced, before ending the day up 10 percent at 39.75 rupees on a Mumbai market that ended flat.
TVS will invest 20 million euros in the tie-up, Srinivasan told reporters. BMW declined to provide details of its investment in the collaboration.
TVS and BMW Motorrad will develop and produce a series of motorcycles in the sub-500 cubic centimeter segment, TVS said in a press release, but each company will sell individual versions of the bikes through their own distribution channels.
BMW, which sold 117,000 motorcycles in 2012, is heavily dependent on Western markets such as the United States, Germany and France, and has a negligible presence in India, where annual sales trail only China.
The German manufacturer will use the partnership with TVS to develop small, less powerful motorcycles, BMW Motorrad President Stephan Schaller said.
TVS has seen its sales fall more than 6 percent this financial year that ended in March, against a 4 percent rise for the overall industry, and has struggled since market leader Hero MotoCorp's 2011 (HROM.NS) split from former partner Honda sparked a jump in competition and a market tilt towards higher-end, more advanced vehicles.
India's No.3 manufacturer in the economy segment of the motorcycle market, TVS lags well behind its rivals in the higher-margin premium segment. Premium sales grew by around 25 percent in the year to March 31, outpacing all other major segments and driving much of Honda and Yamaha's overall rise.
TVS' price to earnings ratio considerably lags Hero and Bajaj Auto Ltd (BAJA.NS). TVS trades at an around 25 percent discount on a one-year forward earnings basis to Hero and Bajaj, according to Thomson Reuters data.
(Reporting by Henry Foy in MUMBAI and Anupama Chandrasekaran in CHENNAI)