In the era of gearless scooters and motorcycles, the BIFR referred LML (Lohia Machines Ltd.) has introduced its 2 geared scooter models in Delhi.
LML has been a sick company since it closed down its production facility at Kanpur in February 2006. Since then it has closed its dealerships in India and instead was exporting to some African and South Asian countries.
If it meets with success in Delhi, it would probably replicate the model in other northern and eastern states.
Probably, LML would have an advantage as it has met with success in the export market leading to some positive cash flow and also there has been a revival in the scooter market as it has registered a growth of 17% in April-July 2007 quarter.
LML could also leverage on its installed plant capacity of 3 lakh scooters & 2.4 lakh motorcycles, and use its old network of dealers to re-enter the market.
But the going would not be smooth for LML as geared scooters no longer sells in the market, and introduction of old Vespa models won’t find any takers owing to technological changes and safety features. It could only score if it has a distinct price advantage over other manufacturers.
It is also learnt that LML is not entering the motorcycle segments owing to financial constraints. But surviving in two-wheeler segment would prove to be tough for LML without having motorcycle in its portfolio owing to its better demand and cost economies than scooters.
But the positive scenario remains that if LML claws back into normal production, then it may rope a strategic or financial investor, which may then aid in improving the company’s operations. Earlier Warburg Pincus and Piaggio were learnt to be interested in acquiring a stake in LML.