AMG - Ducati partnership : Is Mercedes-Benz eyeing two-wheelers finally?

How preposterous can one get with a statement as bold as our title for this feature? Well not since Gottlieb Daimler and Wilhelm Maybach placed the world’s first single cylinder internal combustion engine into their two-wheeled test vehicle – called the Einspur - in 1885, Daimler-Benz has shied away from making a motorcycle or a motorized two-wheeler. However, with the onset of tightening emission norms and group carbon limits, many of the world’s largest carmakers have to think out of the box to try and tackle this important issue in an innovative manner.

The manner in which personal mobility within urban centres is unraveling is a critical one and ever since Renault tried to get into two-wheelers with Malaguti some years ago only to pull out, not having understood the game, it is evident that small two-wheelers would be the key for many of the present day car makers to add to their product portfolios. However, just because one makes, and sells, cars successfully doesn’t imply the same would hold true for bikes, more so given the demographics, the needs and the desires which make motorcycles and scooters appeal to their target groups.

Nonetheless, the news about AMG - the performance arm of Mercedes-Benz, inking a deal with Ducati, the Italian motorcycle maker has evoked mixed reactions from both sides of the spectrum. For one, this was most unexpected catching the world automotive press unawares but after that the conspiracy theories are flying thick and fast, but there does appear to be some logic behind this move from both parties concerned.

While many do think that the tie-up should logically have been for Ducati and Ferrari to get engaged, it is creditable that AMG has upped the ante and gone straight to the one bike maker which would help Mercedes-Benz square up against arch rival BMW which as everyone knows makes both cars and bikes. And since it is AMG that is fronting the deal, the general consensus seems to be a top down approach to the motorcycle world for the German carmaker.

However, there is more than meets the eye to what is presently a strategic co-operation agreement announced jointly by Ola Kallenius, CEO of Mercedes-AMG GmbH and Gabriele del Torchio, President and CEO of Ducati Motor Holding S.p.A. at last the Los Angeles Auto Show. “AMG and Ducati ideally complement each other, as both companies share the same values: racing as the driving passion and high performance plus exclusivity as the central brand messages. This long-term co-operation will help us to jointly access new customer groups,” said Kallenius after inking the deal. Ducati’s del Torchio was just as effusive: “In AMG we have found a partner who perfectly reflects our brand values of high performance, motorsport, excitement and our sense of unmistakable style and design. I am especially proud to have AMG as one of our sponsors for the MotoGP team.”

Intended purely as a marketing synergy tie-up to begin with, the new agreement kicks off with AMG being a sponsor of the Ducati MotoGP team which this year has Valentino Rossi riding as team leader. For the last few years, Fiat used to back the works Yamaha MotoGP team, thanks to the appeal of Rossi as a youth icon, which was seen as a positive bid to rope in many Italian and European youngsters to the Fiat fold. Maybe this could have been the logical choice for Ducati to have got the deal off to a strong start but in addition to MotoGP, there is the chance for both AMG and Ducati to complement each other at customer meets and interactions.

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Research has shown that many AMG customers also own top-end superbikes and thus the pairing is great from an emotional angle as well. However, from the absolute business end of things, the most imperative need would be, for AMG to add Ducati within its fold as a great tool to help reduce the group average carbon emissions. Bikes are comparatively very low emission vehicles and this will nicely help offset AMG’s carbon emissions by a large margin while yet allowing it to keep on making very powerful cars. It would hurt if AMG were to look at another mass market bike maker for the Ducati brand is in sync with its own high performance ethos and thus from a marketing stand point it is a great situation for the German firm.

From the carbon emissions point of view, for the first time since the Einspur of 1885 and an abortive operation to make bikes in the cash strapped early years of the 1920s, Mercedes-Benz has never got on to two-wheels. However, at the Paris Motor Show last year, its Smart division did display an electric scooter and with many firms trying to ready as many new types of mobility concepts for the future urban needs, it is only when and not if for Daimler-Benz to move into two-wheelers.

From Ducati’s point of view, having the backing of a technologically well-equipped and financially strong partner is vital. For many years Ducati as also other Italian exoti-bike makers, has been living on a hand-to-mouth basis. History has shown that while many Italian bike makers have great evocative designs and engineering, they are bad at managing the show and for long Ducati has been under the control of Italian venture capital firm Investindustrial which might be looking to cash out with a hefty profit having stabilized the brand over the last decade. At one juncture, there was serious talk of Indian bike maker Bajaj Auto considering taking a sizeable stake in Ducati but it didn’t follow up on that and instead plumped for Austrian bike maker KTM. This however doesn’t in the least deflect the fact that for Ducati the AMG-Mercedes-Benz angle is too juicy to just remain a marketing tie-up.

Our sources within Italy and Germany do inform us that AMG and Mercedes-Benz are eyeing a long-term association where the German car maker would have the means to acquire control of Ducati and add it to its portfolio. While both AMG and Ducati were quick to say no such plans exist, there is tremendous activity going on within the two organizations as AMG staffers have been spending much time with their Ducati counterparts. I for one wouldn’t be surprised if things move even quicker and an AMG buy-out of Ducati is the logical next step.

WHY WOULD AMG WANT TO BUY DUCATI?

It is difficult to fathom at first glance a deal between a German giant and an Italian niche player but when you factor in logic and assess future needs, the reasons for a marriage are even more compelling.

Marketing research indicates that AMG and Ducati share the same customer base and this would only increase given the synergy between the two.

The most compelling aspect for AMG to stick to its knitting is to keep on making very powerful cars and the only way to keep its group carbon emissions within limits is to add low CO2 emitting products, like motorcycles to its product portfolio. Acquiring Ducati will help from the carbon emissions angle without diluting any of the brand strengths of both.

It is estimated that by 2035, over 70 per cent of the world’s population would be based in cities. Urban mobility is, therefore, constantly being debated and many automotive OEMs are thinking strongly about adding two-wheelers in ever increasing numbers to their line-up.

For Mercedes-Benz, having a foothold in the two-wheeler space will also help it to square off against arch rival BMW which makes both cars and some great bikes. Even more important is that BMW seems to be on a very good wicket with bikes as it seems to make a healthy profit on every unit sold. This could also have helped sway the bean counters at Stuttgart into considering buying out Ducati.

With Mercedes-Benz having a strategic alliance underway with Renault-Nissan, a joint pooling of resources, technical and otherwise would help Renault-Nissan also add two-wheelers to their product line-ups as well. Additionally, China, which is the world’s largest market for two-wheelers, is also a strong market for Mercedes-Benz cars and in such a brand conscious country, the AMG-Ducati deal would be a dream run.