January 22, 2008 / 10:12 AM / 10 years ago

Piaggio to up production in India, launch scooters

MUMBAI, Jan 22 (Reuters) - Piaggio (PIA.MI) will step up production in India and launch scooters in a market that is set to play a greater role in the Italian firm's global operations, its chief executive said on Tuesday.

Faced with a stagnant market in Europe, Piaggio is investing in China, India and Vietnam, and expects Asia's contribution to total sales at 30-35 percent by 2010 from about 20 percent now.

"The Asia-Pacific region offers immense opportunity," Roberto Colaninno said at a news conference.

"We are very positive about our growth in these markets -- they will play a major role in the group's worldwide vision."

Piaggio is looking at setting up research and development centres in Asia, including India, forging new agreements with key partners and tap more sourcing opportunities, he said.

A strategic cooperation agreement with Daihatsu Motor 7262.T, for example, is being extended to supply components, engines and powertrains for Piaggio's light transport vehicles.

It has also entered a new agreement with India's Greaves Cotton (GRVL.BO) for diesel engines for three-wheelers.

The maker of the famous Vespa scooter sells motorised three-wheelers in India and has launched a mini truck to take on leader Tata Motors (TAMO.BO) (TTM.N) in the fast-growing segment.

Piaggio had a venture with LML (LMLL.BO) for scooters, and plans to re-enter the scooter market by 2010 with a hybrid design.

It is investing about 65 million euros in a plant to make 200,000 units of 1-litre and 1.2-litre diesel engines and powertrains that will also cater to its global requirements.

Piaggio will build a new two-wheeler facility, and double its three-wheeler capacity to 200,000 units over the next two years. It will also extend its 100,000-unit four-wheeler capacity to make other sub-two tonne vehicles, Colaninno said.

"We want a bigger share of the market and make India a manufacturing hub for Piaggio's worldwide operations," he said.

Piaggio Vehicles Pvt Ltd, its wholly owned Indian unit, has more than tripled sales from 2003 to about 154,000 units in 2007.

Indian two-wheeler makers sold more than 7 million motorbikes and scooters in 2006/07, but rising incomes and the launch of low-cost cars are expected to encourage quicker upgrades to cars.

Tata Motors this month unveiled a car priced at just over $2,500 and the Renault (RENA.PA) Nissan Motor (7201.T) alliance is developing a $3,000 car with Bajaj Auto Ltd (BJAT.BO).

Scooters and bikes will still have a market, Colaninno said.

"That is a very low price for a car, but there are other factors like affordability, the state of infrastructure and new technologies that indicate the two-wheeler market in India will still be huge for the next 10, 15 or 20 years," he said. (Reporting by Rina Chandran; Editing by Ranjit Gangadharan)

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