Reasons for accumulations of a year’s worth of unsold inventory is bad management decisions and miscalculations of production
Team Orange has been having somewhat of a crisis globally. The company has filed an insolvency too. Estimates suggest KTM is carrying around USD 3 billion worth of debt and is not in good shape. The company has announced it will halt production temporarily in 2025, January and February.
This move has affected as many has 1,000 workers. There have been reports mentioning KTM is not paying workers December salaries and Christmas bonuses. Now, a recent report suggests temporary closure of productions might be due to the vast unsold inventory of up to 2.65 lakh units.
KTM Unsold Inventory
Amidst all the negative developments around KTM, one issue has been brought to light by a recent report. According to German publication Der Standard, KTM has not sold a lot of motorcycles in the last year. The number of units unsold and residing in KTM inventories is significant at 2.65 lakh units.
This number came up during KTM’s insolvency hearing, preceded by an insolvency judge, creditors and stakeholders. As per the arguing lawyers, most of KTM’s issues which led to company’s insolvency, was due to bad decisions taken by company management.
Some of these decisions made by company management include overproduction as well. This has led to the increase in KTM’s unsold inventory of 2.65 lakh units. To put it into context, KTM’s yearly sales is around 2.65 lakh units. So, one can say KTM has one full year’s worth of manufactured inventory that could not be sold.
The report also mentions that the fate of KTM now hangs on outsider investors pouring in. Whihch is most likely to be Indian 2W and 3W manufacturer, Bajaj Auto. Reportedly, lawyer’s arguments point most of the fingers at Stefan Pierer, CEO of KTM and KTM’s co-parent company, Pierer Mobility AG.
What went wrong?
While the unsold inventory piles up to 2.65 lakh units, there have been a few speculations as to how it happened. However, it is a clear result of mismanagement and miscalculation of production. The company probably should have revised its production strategy when the first signs of overproduction occurred.
KTM has been facing slow sales for some time and demand is slowly dying out too. Despite that, KTM continued production on the same scale as previous year. Thus resulting in excessive unsold inventory. Estimates suggest there was a need for a liquidity requirement of around USD 460 million just for storage costs of excess inventory.
Also read – KTM 390 Adventure bookings open unofficially
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