Sunday, April 20, 2008

LML Vespa :RIP 1960-2006

Brand : Vespa
Company : LML

Brand Analysis Count : 321

Vespa is an interesting brand firstly because it was a brand which was once bestselling and now dead and secondly because of its unique history in India.
Vespa first came to India in 1960 with a collaboration with Bajaj Auto. The technical collaboration ended in 1971 and Bajaj and Vespa parted ways. Vespa at that time was considered an iconic scooter brand globally and the brand was owned by Piaggio. Piaggio then joined hands with the Kanpur based Lohia Machines Ltd ( LML) in 1983 and started to roll out the Vespa range of Scooters. By that time Bajaj was ruling the market with the iconic Chetak .
Vespa came to India with a more powerful 150 cc scooters but could not met with success in the Indian market. But launch of LML Select in 1993 was an instant success. The company also revamped the NV series which began to shore up the volumes. during 1991, LML was facing its worst financial crises and the company was referred to BIFR. It was Vespa NV that brought the company back to black . By 1998, LML was the second largest scooter manufacturer in India with a market share of over 28 %.
But the JV between LML and Piaggio did not last long. In 1999 the JV was called off with LML buying Piaggio's stake. LML decided to go alone with the scooters. It dropped the brand name Vespa and continued selling LML NV and LML Select brands .

But during these times, the entire two wheeler industry was redefined . Scooters made way to Motorcycles . Sensing this shift, LML ventured into motorcycles. In 2003, LML launched its first bike in India branded as Freedom. But the entry into motorcycles was a disaster.

LML was falling into severe financial crisis. A labour unrest at the Kanpur plant proved to be the last nail. In 2006, LML closed down the operation of its Kanpur plant. And it was the end of Vespa Scooters.

When scooters was considered a work- machine, it was Vespa which redefined the market. Vespa was stylish and contemporary. It was elegant, youthful and more balanced compared to the sturdy Chetak. While Chetak was the price warrior, Vespa was always the premium scooter. Vespa was commanding the premium for the looks since the technology that drove both Chetak and Vespa was the same.

But like Chetak, Vespa was also myopic. It failed to see the sweeping changes that was happening to the two wheeler market. LML was not able to upgrade the scooters since the JV with Piaggio was called off. It was also reeling under severe financial crisis. These coupled with the shift in focus to motorcycles paved the way for the death of this stylish scooter. LML still manufactures and exports Vespa to US where it sells as Stella and also to UK.

LML could not emulate the success of TVS in launching indigenous technology and surviving the aftermath of a failed technical collaboration. The company also could not replicate the success of Bajaj which reaped rewards by entering the Motorcycle segment. The failure of LML Vespa is a bitter lesson to all Indian business who depend on foreign partners for technology. The problems with most JV's happen with the issue of control. While Indian partners want technology, seldom does Indian entrepreneurs want to lose control over their companies. During the licence raj , foreign partners used to succumb to this because there was no other way to enter the Indian market. But post - liberalisation, Indian market is a level playing ground. Indian business either have to shore up their investment in R& D or may have to negotiate hard with the JV partner on power-sharing.

Piaggio have a presence in Indian market in the three-wheeler segment. The resurgance of scooter market has inspired Piaggio to re-enter the Indian market with the Vespa brand. According to news reports, 2008 may see the re-entry of Vespa once again to India.