The rumors about Volkswagen looking to sell Ducati are apparently true. Volkswagen has found a buyer for the Italian brand. But that’s not all that Volkswagen had up its sleeve. When you are a € 220B company, you can do a lot of things others can’t.
The German manufacturer has brokered a business deal resembling a four-team sports trade. Apparently, Volkswagen also worked with Piaggio (Aprilia’s parent company) and Moto Guzzi to set up the blockbuster agreement.
If approved by governmental authorities, the deal will see Volkswagen purchasing Ducati, Aprilia, and Moto Guzzi for a total of € 2.65B in cash. The three purchased companies will then immediately be sold off to the Chinese automaker Geely for the same € 2.65B. However, Geely has also agreed to a manufacturing deal that will allow Volkswagen and Piaggio to build several undisclosed automobile and motorcycle models in Geely’s low-cost Chinese factories.
Does the deal make sense?
The deal could make sense for all companies. Volkswagen was looking to exit both motorcycle and internal combustion engine (ICE) vehicles as they move towards electric mobility. Piaggio wants to concentrate on scooter sales which make up the vast majority of its powered two-wheeler business. COVID hit Moto Guzzi hard, and its owners were already short on cash.
By brokering the mega acquisition and merger, Volkswagen has now secured an inexpensive manufacturing facility to build some of their ICE-powered autos as they phase them out. The deal also allows the German manufacturer to exit motorcycles completely. Piaggio will also get the benefit of reduced manufacturing costs for its line of scooters.
Geely gets an immediate and strong foothold in the worldwide (not just Chinese) motorcycle market. Motorcycles outsell automobiles in China by more than 50 to 1. While inexpensive motorcycles are already available in China, the acquisition gives Geely three well-known, highly recognizable, and profitable premium brands as well as manufacturing contracts from Volkswagen and Piaggio.
Ralf Brandstätter, CEO of Volkswagen, had this to say about the deal:
“Volkswagen is pleased to announce this transaction which will benefit all the companies involved. The Ducati brand is world renowned for its successes and high quality. Together with the Aprilia and Moto Guzzi brands, Geely will continue to promote and develop these three iconic Italian motorcycle companies.”
Roberto Colaninno, Chairman and CEO of Piaggio added:
“This agreement will begin a new era for the Aprilia brand. Under Geely’s management we expect a new era of growth. We look forward to continuing excellence from the Aprilia brand and look forward to working with Geely in the future.”
However, Ducati CEO Claudio Domenicali appeared less enthusiastic about the deal:
“Ducati has always been and will always be in my heart. We have accomplished great things with the Ducati brand winning many world racing championships to give Ducatisti around the world the best in Italian engineering and style.”
So with the announcement of this deal, I say APRIL FOOL!
Happy April Fools Day, everyone!