Introduction
The motorcycle industry has evolved from traditional motorbikes to a diverse array of specialized types.
Furthermore, several factors make the motorcycle industry an ideal case study for exploring concepts discussed in earlier chapters, such as relatedness, local capabilities, complexity
This case study aims to gain insights into the evolution of technological and production capabilities of motorcycle development by focusing on three hubs: Italy, Japan and India. These countries have significant market size, serve as leading producers and exporters of traditional motorcycles globally and represent heterogeneous segments of the market. Their diverse backgrounds offer fertile ground for discerning the core capabilities that underpin the triumphs or setbacks of firms and regions alike. The motorcycle industry is currently experiencing a seismic shift, so analyzing the historical emergence of the key industry players in these countries, the local technological capabilities they leveraged, the local policies adopted and other determinants can provide valuable insights.
This chapter yields three key takeaways. First, the genesis of the motorcycle industry is intrinsically tied to the capabilities cultivated in closely related sectors. Second, national motorcycle industries tend to chart courses shaped by their historical technological, institutional set-up and policy trajectories. These include the pursuit of high-performance and distinctive design in Italy, the emphasis on advanced technologies and product reliability in Japan and the commitment to cost efficiency and utilitarian features in India. Third, electrification, artificial intelligence and a slew of connected devices and components are revolutionizing the motorcycle industry. This trend seems to mimic the car industry.
Born from bikes: how the motorcycle industry emerged from related industries
History and research tell us that companies – and by extension, the regions they hail from – often build on what they know best when exploring new ventures.
Evidence shows that firms tend to succeed more when they branch out into areas closely related to their existing expertise
The precursor of the modern motorcycle can be traced back to the late 19th century when Gottlieb Daimler, now recognized as the “father of the motorcycle,” crafted the first two-wheeler.
Over time, motorcycles became increasingly complex products in terms of technology and design. In the tumultuous times of both World Wars, motorcycles became vital cogs in military machinery. They were used for communication and transportation by military forces on battlefronts. In Italy, as elsewhere in Europe, many mechanical and machinery manufacturers pivoted to churning out wartime materiel, with those left catering almost exclusively to military demand, causing a lull in civilian usage of motorcycles. Unlike Italy, Japan did not have any motorcycle industry before the Second World War; it was mostly aviation firms involved in the war that repurposed their mechanical expertise, paving their way into the motorcycle industry and eventually becoming industry giants (see Figure 4.1). Wartime involvement both in Italy and Japan shaped these firms,
Military, aviation and space have historically fueled both technological and design spillovers into the automotive industry, from motorcycles to cars. Many technologies, aerodynamic designs and lightweight material used in racing cars and motorcycles are borrowed from the aviation industry. After the Second World War, Italy transformed aircraft remnants into iconic scooters such as the Vespa. Even today’s advances, such as global positioning systems and AVs, can trace their origins back to military tech.
The flow of technological spillovers among these industries has been multidirectional. Many two-wheeler companies ventured into producing four-wheelers and vice versa. The same goes for aviation: Honda, known for its motorcycles, ventured into the aviation sector in the 1980s. The rise of EVs is also broadening horizons. Energica, an Italian electric motorcycle producer, is now exploring its e-powertrain and charging technologies in areas such as air, marine and agricultural transport.
Source: Alexander, 2009. Riding in tandem: motorcycles and the automotive industry’s evolution
The technological interplay between the motorcycle and automobile sectors epitomizes a dynamic exchange of capabilities and innovations. These two industries have historically exerted a profound influence on each other across several critical dimensions, including safety, materials, propulsion systems, autonomous and connected technologies, and environmental imperatives. At the same time, they often compete for consumer attention and market share. As cars became more affordable, fuel-efficient and compact, they also became more appealing to cost-sensitive consumers who would have otherwise chosen motorcycles for their affordability, efficiency and agility. This competition has encouraged both industries to innovate and offer more diverse product offerings that are not only a means of transport but also an object of leisure and passion.
The motorcycle and car industries have several technological cross-pollinations. For instance, advancements in engine design, transmission systems and materials have been shared between the two industries. Motorcycles have influenced the development of smaller, more efficient engines for cars, while cars have contributed to innovations in motorcycle engines and transmissions. Safety is another critical concern in both industries. Advances in safety technologies, such as anti-lock braking systems, traction control and electronic stability control, have been developed in the car industry and later adapted for motorcycles. Similarly, improvements in motorcycle protective gear have influenced the development of safer car interiors and seatbelt technologies. The recent electrification push is changing the landscape of both industries.
Revving up the past: how national tech capabilities shaped the two-wheeler industry
In the realm of two-wheelers, national industries often follow paths shaped by their technological pasts, yet these trajectories are not preordained. Rather, it is the home country’s inherent capabilities, institutional context and state policies that have steered both the birth and growth of the national motorcycle industry. Japan’s motorcycle moguls are lauded for their innovation, reliability and quality. Italy vrooms ahead with its flair for design, speed and artisanal touches. Indian companies have focused on affordability, scale and a deft adaptation to local conditions. Currently these countries, along with other countries such as China and Germany, are leading in terms of technological and export capabilities (see Figures 4.2 and 4.3).
Japan: riding to global dominance
Two key threads run through Japan's motorcycle story: a focus on exports and unique tight-knit supplier partnerships known askeiretsus. Reinforced by government policies, the remarkable Japanese motorcycle journey unfolded in the wake of its recovery after the Second World War. Wartime isolation had left Japan with a significant technological gap compared to the West.
Mirroring early Western attempts, the first Japanese motorcycles also resembled motorized bicycles. Soichiro Honda experimented with the idea of retrofitting surplus generator motors onto bicycles. This idea gave birth to the “Honda motor bicycle” in 1948 and marked the inception of Honda Motors. Initially, Japanese motorcycles were mere replicas of Western designs. However, their focus quickly shifted to innovation and quality improvement.
Motorcycle production started with a handful of tiny workshops in the post-war years. It surged such that the number of entrants reached its peak of 127 in 1952.
In their quest for global supremacy, Japanese manufacturers soon made substantial investments in research and development. Honda was at the forefront of this technological drive. It inaugurated Honda R&D in 1960, which operated in tandem with Honda Motor Co. Ltd.
In the 1980s, further remarkable technological innovations, including the introduction of advanced engine technologies, enhanced suspension systems and improvements in aerodynamics, transformed Japanese motorcycles. During this period, thousands of motorcycle-related patents of Japanese origin were filed, with those pertaining to engine-related technologies being the most common (see Table 4.1). In contrast, patents of Italian origin were merely a small fraction of the Japanese numbers in the same timeframe.
In addition to technological capabilities, another linchpin of the Japanese motorcycle industry has been its unique supply chain capabilities due to the keiretsu ethos
The post-war motorcycle industry in Japan owes much of its success to a series of strategic government decisions.
JETRO and MITI were instrumental in providing Japanese firms with valuable insights into international markets.
Italian motorcycles: where passion meets precision
In Italy, motorcycles are more than just vehicles; they are thrilling objets d’art. They embody a dedication to design aesthetics, unrivaled performance and craftsmanship. Italian manufacturers have a gift for crafting high-end and limited-edition motorcycles, catering to collectors, passionate enthusiasts and racing champions. What sets Italy apart are capabilities that correspond to two opposite ends of the market: high-performance motorcycles, influenced by a rich racing heritage, and stylish scooters and mopeds catering to urban commuters.
As in Japan, the genesis of Italy’s modern motorcycle journey began with firms primarily engaged in related industries: bicycle,
Contrary to the typical trend in mature industries, where consolidation often leads to significant firm exits, the Italian industry had a surge of new entrants after the Second World War. From the 1960s to the 1980s, when government protectionist policies partially shielded the local market, it was the capabilities of these new firms that allowed them to differentiate themselves from the fierce Japanese competitors.
High-volume producers focused on stylish but affordable low-capacity models such as scooters and mopeds (think Vespa and Lambretta) and emphasized mass production in northern Italy. Specialist and niche specialist producers, based mainly in Emilia Romagna in central Italy, defined use markets where motorcycles were not a mere mode of transport, but an object of passion, leisure and beauty. These specialist firms were focused on high-end models which were unprofitable for volume producers. The core capability of these firms was their “specialized flexibility.” Their small size increased their ability to rapidly adapt to new customer preferences. Additionally, the local setting, characterized by cooperation between local government and the business community, along with a prevalent entrepreneurial spirit, fostered a favorable environment for motorcycle companies in the Emilia region.
Proximity to other Emilian iconic brands such as Ferrari and Lamborghini allowed firms such as Ducati to infuse racing innovations into their designs. This translated into improvements in engine, equipment, performance and other technological advances. Additionally, Italian companies invest heavily in branding to cultivate a unique community spirit among enthusiasts, further supported by an extensive range of accessories and branded merchandise. The breadth of goods and services for which they hold registered trademarks reflects their diverse offerings (see Figure 4.4).
Italian volume producers valued capabilities related to streamlining the process and reducing friction points to reduce the time taken to develop a product and bring it to market. However, specialist producers placed greater reliance on the technical capabilities and supplier collaboration for the new product development process.
Technological partnerships prevail among Italian specialized manufacturers (e.g., Ducati and Benelli) and the high-end customized motorcycles often used in racing events (e.g., Bimota).
In the Italian two-wheeler manufacturing sphere, the deep involvement of suppliers enables producers to achieve swift product development cycles, cost reductions, superior product quality and expedited problem-solving. This collaboration grants manufacturers access to suppliers’ expertise and resources, boosting the innovation process. Moreover, research indicates that networks with robust knowledge transfer mechanisms between manufacturers and suppliers tend to outperform those with less developed knowledge-sharing routines.
India: cost efficiency and localization
India’s motorcycle industry tells a tale of transformation, technological catch-up and emergence as a global powerhouse. Once dependent on imports, the industry evolved to meet the vast domestic demand through local production. Apart from this achievement, in 2022 it ranked among the top global exporters of two- and three-wheelers (see Figure 4.3). Two-wheelers are integral to Indian life, constituting about three-quarters of all registered vehicles. Known for its cost-effective production methods, India has become a global nexus for affordable motorcycle manufacturing, prioritizing fuel efficiency and practicality. Emphasizing localization, Indian motorcycle manufacturers often source domestically, optimizing production costs.
In the decades following India’s independence in 1947, the Indian motorcycle industry swiftly evolved from a nascent, domestically focused sector into a robust economic engine. The gradual influx of foreign automobile companies led to further transfer of technology and the ability to produce advanced two-wheeler components and vehicles at relatively favorable costs. Benefiting from resources such as globally competitive steel prices, initially low labor costs and an evolving R&D infrastructure, the industry grew significantly.
Companies transitioned from being original equipment manufacturers (OEMs) to original brand manufacturers (OBMs).
The 1960s marked the rise of two pivotal two-wheeler hubs: Chennai and Pune. Renowned for their manufacturing capabilities, these regions became magnets for prominent global and local companies. Chennai hosts major players such as TVS Motor Company, Bajaj Auto and Royal Enfield, along with automotive giants such as Hyundai and BMW, and tire manufacturers such as Michelin and MRF. Meanwhile, Pune’s two-wheeler scene hosts KTM, Kawasaki and Piaggio, complemented by car brands such as BMW and auto component leader Bosch. Supported by a skilled workforce, favorable policies and investment, these hubs have also seen a surge in their information technology (IT) and electronics capabilities in recent years.
However, the period between the 1960s and 1980s was characterized by sluggish growth and limited innovation, primarily due to regulatory restrictions. The 1980s brought a resurgence with Indo-Japanese ventures, notably Hero Honda, introducing fuel-efficient motorcycles. The capability to produce environmentally compliant, fuel-efficient engines emerged from collaborations between Indian and Japanese producers.
Following the 1991 economic liberalization, the industry underwent a paradigm shift, thanks to trade liberalization, deregulation and promotion of foreign direct investment. Nonetheless, significant innovation only came at the dawn of the 21st century, driven by increased product and process innovation and evolving local consumer preferences. Evidence from patent data reveals that early 2000s India showed no engine and transport capability but, during the next two decades, the country managed to develop complex capabilities in combustion engines, aviation and space (see Figure 4.5).
Government-led infrastructure enhancements, coupled with research and development (R&D) funding, have fostered collaborations and innovation. This trend was amplified by private entities ramping up their R&D investments and global partnerships. The emerging EV sector offers fresh avenues, introducing new brands and dynamics. Electric two- and three-wheelers, given their affordability and suitability for short commutes, are predicted to spearhead India’s EV transition. While these electric variants will need enhancements to match combustion engine prices, their inherent simplicity resonates with budget-conscious consumers and eco-aware regulators.
Greener twists and turns: electrification on two and three wheels
The global shift towards sustainability, driven by the mix of environmental concerns, policy initiatives and evolving consumer preferences, has ushered in an era of transformation within the transport industry. Electrification has become the name of the game, not only for cars but also for motorcycles, electric bicycles (e-bicycles) and micro-mobility solutions such as unicycles and push scooters. Over five years, from 2017 to 2022, e-cycles increased their share of the total motorcycle trade from only 12 percent to 33 percent (see Figure 4.6) with China, Germany and the Netherlands being the top exporters.
The e-cycle trade in Japan has seen a notable increase, tripling from two percent in 2017 to six percent in 2022. Similarly, it doubled in Italy, rising from seven percent to 15 percent, and in India went from zero to two percent within the same timeframe. However, it is in China where the surge has been most significant, with e-cycles jumping from 27 percent of the total motorcycle trade in 2017 to 41 percent in 2022.
From gears to gigawatts: how electrification is shifting motorcycle complexity
Motorcycle assembly and production capabilities typically lean towards the lower end of the complexity spectrum compared to technological capabilities, as illustrated in Figure 4.8. Less straightforward is the comparison between the complexity of traditional motorcycles and e-motorcycles. While there are overarching similarities, manufacturing electric motorcycles (e-motorcycles) and traditional motorcycles involves several fundamental distinctions stemming from differences in powertrains, components and assembly procedures. E-motorcycles are generally regarded as mechanically simpler when compared to traditional motorcycles, primarily owing to their streamlined powertrains and reduced mechanical components. Compared to traditional motorcycles equipped with internal combustion engines, e-motorcycles feature powertrains with fewer moving parts. Traditional motorcycles have intricate engines with an array of components, including pistons, cylinders and shafts, requiring precise machining and assembly processes.
Many e-motorcycles either utilize a single-speed transmission or, in some cases, forgo the transmission altogether. In contrast, traditional motorcycles typically incorporate multi-speed transmissions, adding complexity through additional components and maintenance requirements. Furthermore, the absence of fuel and exhaust systems in e-motorcycles contributes to their overall mechanical simplicity. Despite the mechanical simplicity, it is essential to recognize that they have their own set of complexities tied to battery technology, electric motor design and electronics. Additionally, integral components such as the battery pack, battery management system and charging infrastructure are intrinsic to e-motorcycles and necessitate their own manufacturing and scale production capabilities. This suggests that, while electrification has shifted the industry’s complexity from mechanical to battery-related aspects, determining whether it has increased or decreased the overall industry complexity is a more nuanced matter.
Battery technology is at the core of e-motorcycles, requiring development and procurement of high-performance lithium-ion battery capabilities that can deliver sufficient range and durability. Equally crucial capabilities are design of efficient and powerful electric motors as well as expertise in power electronics for optimizing motor performance, efficiency and range. Integrating sophisticated software for motor control, battery management and rider assistance features is essential and demands expertise in software development and integration. Features such as smartphone connectivity, touchscreen displays and rider-assist technology are increasingly important to enhance the overall rider experience.
Conclusion: the changing landscape of the industry
Since the 2010s, major producers around the world have geared up for the electrification transition. For instance, in Italy, in 2016 the first electric versions across all categories – including motorcycles, scooters, mopeds and bicycles – were introduced. E-motorcycles and e-scooters experienced robust growth in the years following their launch, although 2020 saw a temporary drop, likely attributable to the impact of COVID-19. However, production swiftly rebounded to pre-COVID levels in 2021. Traditional bicycles also saw a resurgence after the pandemic, while e-bikes have consistently gained popularity since their introduction, even in the face of COVID-related challenges. The integrative capabilities of Italian producers allowed them to achieve appealing design despite the addition of batteries for electric engines. These vehicles became viable solutions for urban mobility and sport across various age segments, rebalancing at least in part the loss of market share in other two-wheeler categories. The Italian market’s openness to adopting electric motorcycles is growing, but it is still lagging compared to electric cars.
Moreover, in addition to Western countries such as Germany, the United States of America and the Netherlands, which together account for 50 percent of global electric motorcycle imports,
India, with its vast two-wheeler market and growing enthusiasm for EVs, presents a promising market. In India, the trend toward electrification is driven by shared and smaller vehicles, particularly two- and three-wheelers.
Determining which country is best suited for the motorcycle industry’s electrification involves nuanced elements such as EV infrastructure, government policies, market demand and technological capabilities. China, with its vast market for two-wheelers and rapid expansion of EV infrastructure, leads the race, bolstered by proactive government support and a leading position in battery technology. Japanese consumers have so far proven less willing to adopt EVs, despite initiatives by leading manufacturers and governmental carbon reduction initiatives. Germany and Italy, known for engineering and design excellence and supported by strong European Union environmental policies, are also making strides. India, with one of the largest two-wheeler markets, faces challenges in EV infrastructure. While China currently seems the most prepared, other countries such as Japan, Germany, Italy and India are significant contenders in the evolving e-motorcycle landscape.
Economic and policy implications
The electrification of the motorcycle industry, much like the broader transition to EVs in the automotive sector, comes with advantages and risks. Significant advantages will be mainly in terms of environmental benefits and reduced operating costs. However, due to the automotive sector’s multiple linkages with various sectors, electrification can be a double-edged sword for the economy, having ripple effects beyond the motorcycle industry.
The shift from ICE to electric could lead to erosion of capabilities tied to manufacturing and servicing in traditional ICE motorcycles and consequently job losses in those areas. However, it can generate new job opportunities that require new or repurposed capabilities.
Another important aspect of this transition is the shift in the supply chain dynamics. Once centered on petroleum-based fuels, metal components for engines and the machinery involved in producing ICEs, the industry now demands a different set of raw materials such as lithium, cobalt and nickel for batteries. These minerals are rare and found only in certain countries. This can shift economic strength to regions or countries that have abundant reserves of these minerals. Without advances in battery technology that use more widespread minerals, such as sodium, any disruption in the supply of these rare resources could spark price volatility.
The agility of traditional manufacturers in enhancing their existing capabilities and generating brand new ones is crucial for their survival. To face this, industry giants are pooling resources, moving toward battery standardization, and making alliances with battery makers and beyond. For instance, in April 2019, Swappable Battery Consortium for Electric Motorcycles was established in Japan to propel the industry to join forces to ensure that batteries can be exchanged among different brands and types. The consortium currently consists of 39 members including the Japanese big four, KTM, Piaggio and some big names in electric scooters and even powersports companies.
Role of government policies
A coordinated approach between governments and the private sector can significantly influence the rate and success of transitioning to electrification. Through a mix of incentives, regulations and direct interventions, governments have the tools to shape the future of electric mobility.
Funding or subsidizing research and development in electric mobility, battery technology and related infrastructure can accelerate technological advancements and reduce costs in the long run. Financial incentives through fiscal measures such as subsidies and tax credits to both manufacturers and consumers can help reduce the initial cost barrier associated with purchasing EVs. For instance, in April 2022, Italy issued a decree to incentivize EV purchases. For motorcycles and scooters, the decree will subsidize up to 40 percent of the purchase cost, while for push scooters, e-bicycles and bicycles it offers up to EUR 750 in tax redemptions.
In India, the two iterations of the Faster Adoption and Manufacturing of Electric Vehicles (FAME I and FAME II) plan, in 2015 and 2019, have been directed at stimulating the supply and demand for electric two-wheelers and charging infrastructure by proving incentives to all stakeholders. FAME has resulted in the expansion of product portfolios and capabilities of the traditional two-wheeler and three-wheeler manufacturers, such as Hero and Bajaj, expansion of brands from other sectors that entered the electric two-wheeler manufacturing sector, such as Ola Electric, and the introduction of new brands that are solely focused on producing electric two-wheelers, such as Ather Energy.
Governments can adjust import and export tariffs to favor the import of e-motorcycles, their components or raw materials needed for battery production. Imposing differential pricing of petrol and electricity can also make electric two-wheelers more appealing.
Correctly implemented government policies, coupled with the private sector’s adaptability during moments of industrial transition, can create significant opportunities for technological catch-up and leapfrogging in developing countries.
The failure of the Italian and Japanese private and public sectors to adapt swiftly and the possibility of becoming entrenched in outdated technologies could threaten their dominance. Notably, even if they pioneered e-bikes and e-motorcycles and hybrid technologies decades ahead of the current electrification trend,