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KEL: Marginal existence - Views on News from Equitymaster
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  • Aug 5, 1999

    KEL: Marginal existence

    Kinetic Engineering Ltd. (KEL) plans to launch a 4 stroke 125 cc motorcycle, a 100 cc motorcycle, mopeds and step ins in the current financial year. The four-stroke motorcycle is being manufactured in technical collaboration with Hyosung Motors, South Korea.

    KEL, which till recently had an alliance with Honda Motors, Japan, is trying to gain an entry into a fiercely competitive but fast growing market for motorcycles. The company also plans to broaden its product range by introducing products that have been developed in house.

    The motorcycle market has been grew at 29.1% in 1QFY2000, while scooter sales actually fell 11.7% during the same period. The mopeds segment, which is Kinetic's forte, grew by a marginal 2.9% during 1QFY2000. The attraction to the motorcycle segment is clearly reflected by these growth figures.

    KEL has suffered a major setback with Honda snapping its ties with the company. However, KEL seems to have stepped on the gas, after the break up, as far as R&D expenditure and introduction of new products is concerned.

    With the absence of support from a giant like Honda, the company's future is at best vulnerable. This seems so mainly because of the presence of large players in these segments - Bajaj Auto (tie up with Kawasaki), Hero Honda (tie up with Honda), Escorts (tie up with Yamaha) and TVS Suzuki (tie up with Suzuki). These companies have large capacities, well established R&D facilities and also deep pockets to sustain losses while launching new products. KEL at best could be a marginal/niche player in the industry, if it were to go alone.



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