KTM NORTH AMERICA’S CEO JOHN HINZ ON WHERE THE SPORT IS NOW & WHERE IT IS HEADED
BY JOSH MOSIMAN
In 2007, 1.1 million total new motorcycles were sold in America (street, adventure and off-road bikes all included). After the global financial crisis of 2008 to 2010, it dropped below 600,000. Since then, sales have ranged between 532,000 to 573,000 and manufacturers have scaled down production accordingly. In 2020, over 603,000 new motorcycles were sold, an 11 percent boost. The Covid-19 pandemic has killed off other industries, but it has been a catalyst for opportunity in our sport. The shutdowns have caused many to look to motorcycles as a source of excitement and as an escape to the negativity found elsewhere. In comparison to street bikes, the year 2020 saw off-road motorcycle sales increase from 24 to 31 percent and now the industry is looking for ways to keep up with the increased demand and retain the new riders. In this interview with John Hinz, CEO of the KTM Group North America, we learn how KTM dealt with the shutdowns and how they’re using their electric minicycle lineup to seamlessly introduce young new riders to the sport we love.
“THE COVID-19 PANDEMIC HAS KILLED OFF OTHER INDUSTRIES, BUT IT HAS BEEN A CATALYST FOR OPPORTUNITY IN OUR SPORT. THE SHUTDOWNS HAVE CAUSED MANY TO LOOK TO MOTORCYCLES AS A SOURCE OF EXCITEMENT AND AS AN ESCAPE TO THE NEGATIVITY FOUND ELSEWHERE.”
JOHN, WHAT WAS IT LIKE FOR KTM WHEN COVID HIT? We had high expectations for the year 2020, and we had a great finish to 2019. January and February of 2020 were both record months for us in terms of retail sales, and we were on track to have another record month in March. We started to hear about the Coronavirus in mid-February. It was March 15th when everything got real. There were a couple of states that shut down before that, but it was when California shut down that I called our executive team together and said‚ “Hey, this is real; we’re implementing the plan. Everybody is going remote, and this is what we’re going to do.”
I told our team there were three things that we needed to do to keep our business: (1) generate revenue, (2) collect revenue and, most important, (3) make sure to keep all of our employees. The employees are our number-one asset; they make the company what it is. They mean everything to us. They’re the ones who drive the business forward, help take care of our dealers and ultimately deliver what we think are the very best products in the world to our customers.
HOW DID YOU KEEP YOUR EMPLOYEES WHEN THE WORLD SHUT DOWN? We actually pooled vacation time from all employees and then set up a vacation donation policy. For employees who didn’t have an actual function to perform, like racing, promotional events, marketing, media and R&D, we were able to donate our paid time off between employees to make sure everybody got a paycheck. If needed, we had a special Covid fund so everyone still had a paycheck beyond that. We found different work for everybody to do. We put our employees at dealerships to assemble motorcycles. We had employees transporting bikes between dealers. We painted our buildings, painted fences, and cleaned out warehouses. We did everything we could do to find work for employees who weren’t working their normal jobs.
HOW WAS KTM ABLE TO KEEP GOING WHEN MOST BUSINESSES STOPPED? There were federal regulations as to what defined an essential business, and most states had their own state regulations. If any state closed down, we would immediately get as much information around that closure as we could. I would call our team at any time, even weekends and evenings. We would read through the requirements and make sure that our business qualified as an essential business, which it does. We’re in transportation. We’re essential to the security of the United States of America and all of the states we do business in. I can tell you that for a fact.
“THERE WERE FEDERAL REGULATIONS AS TO WHAT DEFINED AN ESSENTIAL BUSINESS, AND MOST STATES HAD THEIR OWN STATE REGULATIONS. IF ANY STATE CLOSED DOWN, WE WOULD IMMEDIATELY GET AS MUCH INFORMATION AROUND THAT CLOSURE AS WE COULD.”
The motorcycle industry sold 1.1 million motorcycles in 2007. Since then, it has been cut in half. Now, the pandemic has brought in a new wave of motorcycle riders.
WERE YOUR DEALERS ABLE TO STAY OPEN? Yes, we worked together to help our dealers stay open. We would also read through the regulations for our dealers across the country to make sure that they were essential. If they didn’t meet the state’s requirements, then we would work to make sure that the state would open up. In the case of Pennsylvania, we wrote letters to the governor’s office. We called the governor’s office. We engaged the Motorcycle Industry Council for support as well, and we helped the state of Pennsylvania understand that the dealers were providing an essential service and they had to be open—then they reopened. We also did the same in Canada in the provinces of Quebec and Alberta. We helped out in New Mexico the second time it was shut down, too.
WHAT DID YOU DO TO HELP THE DEALERS PRESS FORWARD? Through the year of 2020, we did everything we could to help our dealers keep their doors open and do the best they could through the pandemic. We helped them with inventory planning for the product that was on showroom floors. We helped them with their payment plans with us, as well as with the banking institutions that we work with. We helped them with transporting inventory between dealers, storing inventory for them at our warehouses or shipping them more inventory if they needed it. We did whatever our dealers needed to support them, especially in the months of March, April and May when the future was unknown. We also reached out to the Motorcycle Industry Council (MIC) and other industry leaders to connect and share what the best practice was and share knowledge in terms of what was going on.
HOW DID YOU CONNECT WITH ALL YOUR DEALERS? In terms of connecting our dealers to that information, we started round-table Team meetings (online video calls), and we went around the country, district by district, bringing together the dealers to talk about the support that we were providing, as well as what were “best practices” and what we were seeing around North America in terms of dealerships staying open, selling bikes, parts, gear, safety equipment and servicing motorcycles. On these calls, sometimes we would have dealers that were close to tears and others that were elated because the business was so different from community to community. It was almost cathartic for all of us to have these open discussions and share what we were feeling, what we had found through the process, and what we could do to continue doing business and support our customers.
“IT WAS TOUGH, BECAUSE RIGHT WHEN WE LAUNCHED, ALL OF THE TRIALS EVENTS WERE SHUT DOWN. SO, I SAID TO THE TEAM, ‘IF NO ONE ELSE
IS GOING TO DO IT, THEN WE HAVE TO…SO, WE PUT ON OUR OWN TRIALS EVENT.”
WHAT WAS IT LIKE TO LAUNCH A NEW BRAND IN THE MIDDLE OF THE PANDEMIC? In late 2019, Pierer Mobility had purchased 50 percent of GasGas the brand. Then, in early 2020, it was purchased fully, 100 percent. We launched the trials segment (an all-new segment for KTM) and set up a new dealer network for GasGas to help support the North American market. We had a strategy before Covid and stuck with it through the pandemic. We talked to our dealers and the existing GasGas dealers about the opportunity that was coming up. The business relationship that we have with them is extremely strong. They believe and trust in our organization, and they know that we’re going to do the very best thing for the sport of motorcycling. They signed a contract in the middle of a pandemic to sell GasGas motorcycles. Then, we had to find a way to launch the actual Trials product itself. Of course, we look to racing as our number one marketing activity, and now we have Daniel Blanc-Gonnet and Madeleine Hoover as our two trials athletes.
HOW WAS IT GETTING INTO A NEW MARKET LIKE TRIALS FOR THE KTM GROUP? It was tough, because right when we launched, all of the Trials events were shut down. So, I said to the team, “If no one else is going to do it, then we have to.” So, we put on our own trials event, the California Trials Invitational, and we brought the top seven male riders and top three female riders to the event. We did it without spectators, but we captured it and pushed the content out with the media to help support the sport of trials and launch the brand of GasGas.
HOW DID YOU DEAL WITH THE EVER-CHANGING NATURE OF THE PANDEMIC? Starting on March 15th, when the country and states were shutting down and retail sales halted, I changed all of our reporting. Our reporting was increased to a daily communication as we started looking at what was happening with wholesale, our shipments to dealers for both parts and motorcycles, and what was happening with retail sales out to consumers on a state-by-state level and country level. We looked at the brand, product and model, and didn’t just compare them year over year; we would actually compare day by day so we could truly understand what was happening with the motocross, minicycle, enduro, cross-country, dual-sport and street markets. There were still places in the country where you could ride motocross, and we would see sales in those areas were still good. Other areas, like California, the business got shut down, which meant that motocross tracks got shut down and sales fell. With our detailed reporting, we could see that when one track would open, it would affect our sales positively.
“WHAT WE SAW IN COVID WAS THAT ONCE WE GOT PAST THE FIRST SCARE IN MARCH AND APRIL OF 2020, OUR DEALERSHIPS
WERE ABLE TO OPEN UP AND HELP SUPPORT CUSTOMERS WHO STARTED RIDING AGAIN.”
SO, YOU FOUND WAYS TO ADAPT TO THE UNIQUE TIMES? We started daily meetings with our sales staff to help understand what was happening in their territory with their dealers, who was able to sell and who wasn’t able to sell. Then, if a state or county would shut down, we had an action plan that we would implement with the dealers that would be affected in those areas. Most important, we talked to our sales staff and the dealers about where they were at from a personal standpoint. If you go back and look at what was happening at that time, canned goods were sold out, toilet paper was sold out and people were buying bags of rice; people were at a very basic biological need. There was no one who would buy motorcycles from our dealers and no dealers who would buy from us if they were buying toilet paper. Soon, when people started feeling more comfortable in the community, we saw people coming back together to buy motorcycles. That’s when we saw things start to expand.
WHEN DID SALES START TO GROW AGAIN? It was around April 17th. We saw retail sales come close to the level of the year before. Then, a week later, we saw retail sales start to go up. As soon as we saw some of these key indicators, where retail was going up, there was stimulus money going out, people had government support, they were quarantined for a month or so and they wanted to get out. That’s when they rediscovered motorcycling. When we saw that happen, I spoke with our board of directors in Austria and said, “This is the moment. We need as many off-road, motocross and small-displacement street bikes as we can get.”
HOW WAS THE PRODUCTION LINE AFFECTED BY THE SHUTDOWN? Our factory was closed for eight weeks, but as soon as we had all of the safety protocols in place for our employees to come back to work safely, the factory reopened. They actually hired 70 more people and increased time on the assembly line to build North American spec products to meet the demands of our market. We were very quick to react, because we looked at the details every single day. We were able to develop a very clear picture about where the industry was headed and how to grow the sport of motorcycling. Production is back on track now, and it didn’t impact the timing of any product development or any future production motorcycles. Our 2022 model year line is going to be available in late May/early June, as it always is.
WHAT WAS IT LIKE TO MANAGE AN ORGANIZATION LIKE KTM IN 2020? At that time, it felt like a day was a week, a week was a month, and a month was a year. In terms of the passage of time, when you would work a day at that time, there was so much going on and so much information to bring in to help make good decisions for our employees, the business and our dealers. It was a hectic time.
WHERE IS THE INDUSTRY NOW, AND IS IT MOVING FORWARD? Right now the industry is incredibly vibrant. It’s exciting. There’s a renewal and a resurgence in terms of interest in the sport of motorcycling, really in all areas, but we see this tremendous interest again in off-road motorcycling, especially small-displacement, entry-level dirt bikes. The segment of small-displacement trail bikes has been massive in 2020, and it continues into 2021, which is a huge sign of confidence moving forward. Families coming into this sport are bringing their friends and their neighbors and introducing them to the sport of motorcycling. Trail bikes are the entry point into our industry for many riders.
WHAT BIKES ARE SELLING NOW? What we saw in Covid was that once we got past the first scare in March and April of 2020, our dealerships were able to open up and help support customers who started riding again. The first thing we saw in our sales was an increase in enduro bikes, because people were riding them on their private property. Then we saw an increase in sales for our full-sized line of motocross bikes. After that, we started to see the industry sell trail bikes. At that point, families were stuck at home and parents were starting to ask themselves, “What can we do?” And they answered, “We can go out and ride as a family with the kids.” At that point, trail bikes started to sell. Really all categories and displacements saw an increase, but it came at a staggered timeline as COVID allowed people to go out and enjoy the sport.
ARE MOTORCYCLES THE FEEL-GOOD STORY OF 2021? Coming out of Covid, families are engaged. They see the sport of motorcycling as a way to get outside, be together as a family, be together with friends, but in an environment that is relatively safe from Covid. That was part of the resurgence. Of course, as soon as you get that one moment where you really experience motorcycling for the first time, you’re hooked. Once they have that moment, they fall in love with the sport of motorcycling.
“WE SEE ELECTRIC AS AN OPPORTUNITY TO GROW THE SPORT OF MOTORCYCLING THROUGH THIS NEW GENERATION OF
RIDERS WITH SOME OF OUR PRODUCTS, LIKE THE CO-BRANDED STACYC BIKES AND OUR E MINI LINE.”
HOW IS THE KTM GROUP LOOKING TO BRING NEW RIDERS TO THE SPORT? Our co-branded Stacyc electric bikes are helping bring young people into the sport of motorcycling, and our Mini-E product for our brands provides the transition from a Stacyc or a PW50 to an electric Pee-Wee. It’s great for parents and for new young riders, giving them an opportunity to start their journey in the sport of motorcycling.
MANY PEOPLE ARE SCARED OF ELECTRIC BIKES. WHY IS KTM PUSHING THEM? We saw an opportunity to bring electricity to the sport of motorcycling. But, instead of starting with a full-sized motocross bike to try to transition riders who grew up riding internal combustion engines, we started with an entry-level bike. It’s harder to convert someone who is a die-hard two-stroke or four-stroke rider over to new technology. The electric bikes are made for young riders who really only know electric. They know electric scooters, electric skateboards; they know how to plug things in. They’ve been working on iPads and have had cell phones from a young age.
For them, having an electric motorcycle and plugging it in is very natural. For experienced motorcycle riders and racers, going from internal combustion to electric is a completely foreign experience. For the KTM Group, it was the natural thing for us to bring that product to the very entry level where it provides a lot of benefits. The parent can control the torque and the power for the young rider, and the young rider can grow with the motorcycle. We’ve actually made it so that they’re adjustable and can fit a rider from 3 years old up to 9 years old. During that time, they can adjust the bodywork to fit the child as he or she grows, and they can adjust the power output to fit the needs of the rider as his or her skill set progresses.
WHAT’S NEXT FOR ELECTRIC MOTORCYCLES? We see electric as an opportunity to grow the sport of motorcycling through this new generation of riders with some of our products, like the co-branded Stacyc bikes and our E mini line. Young riders will eventually be exposed to two-stroke and four-stroke internal combustion engines. And, internal combustion technology is going to be here for a long time.
One thing is for sure; we want to grow the sport. We are committed to our two-stroke and four-stroke technology, but we are going to grow our electric development at the same time. We are going to continue to evolve our products and continue to evolve the application of technology to help meet the demands of the market and go where we feel there are opportunities to reduce barriers and engage more people in the sport of motorcycling.
ARE ELECTRIC BIKES GOING TO REPLACE FOUR-STROKES? There’s a global macro trend in electrification, and we see an opportunity to bring that electrification into our sport and grow the sport of motorcycling. We started with mini bikes, and we think that’s the right spot to start. You’ll see us continue to grow from a young rider’s perspective on up. If battery opportunities change and engine management and engine technology change, it’ll give us opportunities to bring new product to market, diverse products that help meet the needs of future motorcyclists. But, make no mistake about it, we are completely committed to four-strokes and two-strokes. Electrification is part of the future, but it is not a replacement. It’s a new technology to bring in a new generation of riders.
“THERE’S A GLOBAL MACRO TREND IN ELECTRIFICATION, AND WE SEE AN OPPORTUNITY TO BRING THAT ELECTRIFICATION INTO OUR SPORT AND
GROW THE SPORT OF MOTORCYCLING. WE STARTED WITH MINI BIKES, AND WE THINK THAT’S THE RIGHT SPOT TO START.”
WHAT IS THE SWAPPABLE BATTERY CONSORTIUM WITH KTM, HONDA, YAMAHA AND PIAGGIO ALL ABOUT? Right now, the manufacturers agree to use 91-octane fuel for our internal combustion engines; it is an industry standard that helps the consumer. This kind of agreement is what we need to set a standard for electro mobility. That’s the easiest way to understand it. With batteries, whether for a moped or a motorcycle, if it’s easy to change the battery and easy to exchange it, then it’s going to help the growth of electric motorcycles. Standardized batteries, standardized charging, and standardized charging ports all lead to a better industry.