P2Motors interview: Kinetic’s plans for America

Two weeks ago, Armando Gonzalez of Phase2 Motors contacted 2sb to let us know he was working on bringing the Kinetic “Italiano” line of scooters to America. To make a long story short, Kinetic is an Indian manufacturer that, in 2003, acquired the rights to manufacture and distribute seven Italjet models worldwide. Italjet became more-or-less defunct around the same time, and Kinetic has been working towards bringing these models to market ever since, under the “Italiano” name. Early this year, Kinetic released their version of the Italjet Millenium (as the Kinetic Blaze) with positive results, and promised bring the Velocifero to America. Recently, Kinetic issued another press release promising the Blaze, and quietly removed the Dragster from the list of Italjets it planned to release. (Massimo Tartarini, son of Italjet head Leopoldo Tartarini and owner of the “Italjet” name has several times announced plans for the Dragster, but hasn’t followed through, to our knowledge.) Back to Kinetic, here is our interview with Armando Gonzales:

2SB Hi Armando. We’re glad you contacted us and we’re dying to hear your story. First, maybe you could tell us about yourself; your background and how you got involved in scooters.

Armando Gonzales, P2Motors (P2M)My dad was a big fan of motorcycling so my brother and I were riding mini-bikes by the time we were in 1st grade. My dad just shipped me the 49cc twist-and-go Indian mini-bike where I cut my two-wheeled teeth, and I just got it running again after about 30 years of garage time. I graduated to a number of dirt bikes thru my kid-years, but thru college and my early career years, I didn’t ride much at all, and just got my motorcycle license last year. I don’t have a lot of experience with scooters, but without writing an entire novel here, last year I discovered Kinetic online.

I guess a number of factors have come into somewhat of a mid-life nexus (not crisis!) for me: an interest in starting a new business, a lagging interest in my corporate job, a stroke of providential luck, and a resurging interest in two-wheelers. Through a few email exchanges, I found out Kinetic’s managing director was going to be in San Francisco and received an invitation to meet him at the airport. That meeting started the journey of becoming a would-be Kinetic scooter distributor. Over the past year, I’ve met with their existing (and soon retiring) distributor in Philadelphia, met with the Kinetic managing director twice, visited with Kinetic at their plants in Pithampur and Amednagar, and met CEO Arun Firodia and other senior managers at their corporate headquarters in Pune.

2SB What can you tell us about Italjet currently? It appears that the company (or the name at least) is still around, but they are not producing anything, nor supporting their old product, since they made the deal with Kinetic. Is that the case as you understand it?

P2M Unfortunately, I can’t tell you much and probably know less than you and most of your readers. During my trip to Kinetic last June, I was told the following:

• Kinetic bought exclusive distribution rights to the designs for the Millennium, Velocifero, Jupiter, Torpedo, Formula, and Jet-Set models.
• Mr. Leopoldo Tartarini (Italjet founder) apparently wanted to retire and Kinetic (according to one manager) saw this as an opportunity to expand their image.
• According to someone at Kinetic, Mr. Tartarini’s son is the owner of the Italjet name… apparently Kinetic thought the price of the name was too high and chose not to include that as part of deal.

2SB Is the US Italjet dealer defunct? Have you been in contact with them at all?

P2M I don’t know. Since Kinetic has exclusive distribution rights (at least to the above mentioned models), I can only assume that their local distributor is either pursuing other interests or (this is just a wild guess) working with Mr. Tartarini on some further developments under the Italjet moniker. While the latter is possible, it sure seems unlikely.

2SB I’d agree. Can you talk about the history of Kinetic in America? I’m familiar with their history in India and I see their mopeds turn up occasionally here, but it doesn’t seem that the current importer has done much to build up the name, in fact, I couldn’t track them down on the internet.

P2M Kinetic began selling their Luna/TFR mopeds in 1984 through Cosmopolitan Motors in Philadelphia. They also had a 2-stroke 50cc scooter called “Milano.” Cosmo/Kinetic has sold almost 30,000 mopeds over the past 20+ years, many through small independent shops and catalogs like Northern Tool and Equipment. It doesn’t appear to me that a lot of effort went into setting up a dealer network for Kinetic, which may be one reason why the brand has never been well established. The failure to plan for the increasingly stiff EPA regulations and the invasions of low-price Asian imports also contributed to Cosmo’s difficulty in getting the Kinetic brand a foothold in the U.S.

2SB The ex-Italjet line has been renamed “Kinetic Italiano” for the Indian market, but the model names would be mostly unchanged. Would this be the same situation in the US, or would you be rebranding them for the US market (a la Genuine)?

P2M Kinetic re-branded the Millennium model the Kinetic Blaze for the Indian market and has been calling the Italjet models the “Italiano series.� Although Kinetic does not have rights to the Italjet name, Kinetic has the rights to the names of the six Italjet models.

In my initial discussions with Kinetic, my goal was to build the Kinetic brand in the U.S. market. Genuine used the private label approach to resurrect a discontinued product line when Piaggio decided to quit building Vespas through LML (see the article in the June, 2005 edition of Business 2.0). Genuine bought the designs, and LML kept their production lines running to produce the Stellas (well, until recently). The Kinetic/Italjet situation is a bit different since Kinetic (the Indian OEM, not a U.S. entrepreneur) is using the Italjet designs to strengthen their product line. For now, I would still plan to sell the Kinetic/Italjet products as they currently exist, although if design changes or market demands drive a different strategy that could change. I’d like to see Kinetic continue their transition from a “low-cost Asian supplier� to a real brand competing on the world stage.

2SB A few months ago, Kinetic announced they were developing the Velocifero for the US market ONLY. Last week, they said the Blaze, as in India, would be the first model here. Was the Velocifero comment related to your plans, and have those plans changed?

P2M I read that article about the Velocifero and can’t speculate on what the strategy was when Kinetic issued the press release.

2SB Would the Kinetic bikes feature the same engine design and same displacements as the Italjet versions, or is Kinetic developing their own engines?

P2M Kinetic is designing their own engines and they may be different than the original displacements in the Italjet versions. The Blaze (Millennium) uses a 165cc Kinetic-built powerplant. I rode the Blaze and Jupiter at Kinetic’s test track in Pithampur. The Blaze outran the 250cc Jupiter from 0-60mph. Some may scoff at Indian-built motors. Kinetic has established themselves as a first rate supplier of automotive and farming components for companies around the world; Bombardier being one company that comes to mind. Kinetic has some great processes for quality control, including calibration and metallurgy labs that are top notch and managers trained in the art of statistical process control and various facets of Total Quality Management. The factory in Pithampur was built with money from a Honda partnership in the ’80s-’90s. I’ve used “Japanese qualityâ€? as one of my slogans on the p2motors website. Admittedly, that is a bit of marketing hype. Kinetic’s final assembly and design processes are not yet up to world-class standards, particularly those of Japan, but their manufacture of individual parts and components is darn close.

2SB Are you hoping to handle the distribution and dealer network yourself, or are you looking to partner with an existing distributor?

P2M I’m open to whatever ideas will lead to a successful launch of Kinetic products in the U.S. Partnerships can be difficult to manage unless the partners are well-aligned on their vision and strategy, not to mention their personalities and working styles. I am open to exploring partnerships under the right conditions.

2SB You mentioned Cosmopolitan Motors had some problems getting product from Kinetic. BajajUSA (Now ArgoUSA) and Genuine Scooter Co. have both faced supply problems (from Bajaj and LML, respectively). Even Italjet was notorious worldwide for their abysmally bad parts supply. What makes you think you’ll have better luck getting bikes and parts?

P2M I have superpowers beyond the limits of human imagination! Seriously, this is a great question. At this point, all I can say is that everyone recognizes this is a key issue for importers and it will be at the top of my agenda. Here are some things I will be working with Kinetic on to mitigate potential problems:

1. Use common engine families. Using a common “engine family,� by definition of the EPA and CARB, means using the same carburetion, engine, and exhaust system. This not only reduces the cost of getting EPA/CARB compliance certificates, which can run $20,000 per model, but it reduces the number of different parts that the distributor and/or dealers have to keep in inventory. Cost control is critical in the scooter market because the volumes and margins are small relative to other products in the motor-sports market… i.e. it’s hard to stay solvent as a scooter distributor/dealer because it’s a small niche market.
2. Focus on building a brand with one company. Many small importers chase a variety of product sources (sometimes by necessity – Chinese dirt bikes and ATVs, Indian scooters, etc). This also increases inventory costs, adds complexity to the operation, and dilutes the brand. It also complicates the distributor/dealer relationship. I want Phase2 Motors to be the one-stop shop for all things Kinetic. I do not want to be the guy who sells 50cc and 300cc ATVs from Chinabike (fictitious name) and scooters by Kinetic.
3. Build a statistical model for spare parts. Kinetic has statistics on which parts are the most frequently used. We will be sure to keep a good supply of those parts and keep updating that model for the U.S. market.

If the demand is here and Kinetic can make money meeting the demand, and if Phase2 can keep the customers happy and costs under control then everything is peachy. None of this is easy of course, so it remains to be seen how things will go. I’ve spent almost 15 years with the Boeing Company supporting airline customers. Providing spares, quality documentation, and overall support for $150M airplanes is what I’ve done throughout my career and it will be a focus at Phase2 Motors.

2SB While Genuine seemed to have LML’s ear, BajajUSA seemed to have less clout with Bajaj Auto. Peugeot didn’t even seem to be aware their bikes were being sold here. What is p2Motors’ relationship with Kinetic, and how are they reacting to your suggestions and requests? How involved will they be in the US operation?

P2M One of the things I’ve learned as an Airline Support Engineer is that there is no substitute for face-to-face meetings. Email, web-conferences, etc. are great tools, but meeting the Kinetic staff face to face had a transformational effect on the relationship. The person at another node in cyberspace ceases to be a faceless person typing emails and becomes a true colleague and friend interested in mutual success.

Since I’ve yet to import anything from Kinetic I’ve only had minimal history with “reactions to suggestions…â€? I can say they treated me like a king while visiting them in India, and they were very responsive to the requests Cosmopolitan Motors made [regarding] some of the quality issues on the TFR moped. It probably sounds like mushy corporate-speak, but whether it’s working with Kinetic or U.S. dealers, I will strive to maintain a positive, “working-together” relationship. I’m not much into adversarial back-biting and trying to squeeze out two more dollars of profit. If we can negotiate a fair deal where everyone wins then… well… everyone wins.

Regarding Kinetic’s involvement in U.S. operations: Kinetic feels the local distributor is more on top of the cultural issues and better positioned to deal with the market so they tend to be hands-off. In India, they are marketing the Blaze as a product that will help the rider have a “macho� image. Their advertising show pictures of Sylvester Stallone, Antonio Banderas, Robert DeNiro and other shining examples of manhood. This is clearly a humorous marketing approach for scooter riders in the U.S. Scooters may be hip, but they aren’t macho. Here’s an exclusive and unpublished link for readers of 2strokebuzz that takes you to a flash presentation from Kinetic. (You will need the Shockwave player installed on your machine and it ends abruptly after the “what men want sequence.�) You can see the difference in marketing tactics.

2SBWhile the Dragster was so far ahead of its time that it still looks fresh and it would probably sell itself, some of the other Italiano models were released a decade ago and seem a bit dated. What will set them apart from other scooters on the competitive U.S. scooter market?

P2M I guess the old saying, “there’s no accounting for taste� rings true here. The Formula looks like a somewhat civilized Dragster, the Velocifero has a nice Vespa-retro look, the Torpedo isn’t unlike other big-wheeled models out today and the Euro/Jet-Set has a look all it’s own. To me the Italjet line-up has a nice distinctive look from the fairly homogenous looking stuff coming out of other parts of Asia. I’d be interested to hear more on specifically which models look dated and some suggestions on what could be done to improve them. According to press releases, Mr. Tartarini will continue to design new models for Kinetic. I wouldn’t put too much money on that, but maybe the old man has a few tricks still up his sleeve.

2SB Is Kinetic updating any of Italjet’s technology or features to keep up
with current trends?

P2M Nothing specific that I’m aware of, but that doesn’t mean it’s not happening. Certainly they are looking to fit the right engines, and I heard they were looking at electric motors for the smaller bikes. I’m sure their R&D staff is continuing to look for opportunities to deploy enhancements to the ignition and fuel delivery systems (i.e. fuel injection) as implied in the article I read here on 2strokebuzz (re: partnership with Ducati). One of the unique challenges for American scooterists, distributors and dealers is that our market is tiny compared to the overseas markets. Kinetic sells over 100,000 scooters per year in India, and they are the fourth largest scooter maker there. Comparatively speaking, the total U.S. scooter market is somewhere in the 60,000 scooter per year range (according to Dealer News magazine, which may actually be 80,000 if you include all the gray and black market scoots that go unregistered by DMV). If you’re Kinetic, and you’re going to sell maybe 2000 scooters in the U.S. and risk a $5M dollar lawsuit from an ambulance chasing American attorney (it should surprise no one that we have the honorable distinction as the most litigious country in the world), the U.S. market just isn’t all that attractive. So unlike many other sectors of the American economy, our leverage is somewhat limited.

2SB Any idea how the price of the Italiano line would compare to the price of the
Italjet versions when they were on the market here?

P2M I don’t have the price history on the Italjets so I haven’t done a comparison. Anything I’d say right now would probably be wrong and disappoint a bunch of people. Here is a data point though: According to the above mentioned article from Business 2.0 Magazine, Genuine claims to have shaved 37% off the price of a Vespa to get to the Stella price.

2SB Presumably you’ve seen and ridden the production-model Blaze. How does quality compare with other manufacturers?

P2M My inexperience with current scooter models prevents me from giving you a legitimate answer here, but I’ll take a shot with my impressions of the Blaze relative to the other Kinetic models I rode in India. I rode the Blaze on Kinetic’s gravel test track and it was a solid machine. The Kinetic Nova was also nice, but there was a significant difference. The overall ergonomics of the Blaze were better, the quality of all the components (e.g. mirrors) were better, the blinkers had a beeping reminder signal to prevent the rider from leaving the blinkers on, and the 165cc engine made for quick acceleration. The suspension took the bumps well and the ride was always under control. On a short half-mile or so straightaway, wearing a helmet, khaki pants, and a t-shirt (i.e. no real safety gear) I accelerated the Blaze to about 95kph (close to 60mph) on gravel and never felt unstable. The stopping performance was also smooth and predictable. There was a slight vibration at around 15mph when slowing to stop. The Kinetic folks told me they had put a lot of effort into frame damping to try to remove the vibration, but it still wasn’t perfect. Having said that, I test rode a Buell Blast a few months ago at a local Harley dealer and the vibration on that bike was significantly worse than what I experienced on the Kinetic Blaze.

2SB Have any of the other models been prototyped or produced yet? Have you had the opportunity to see or ride them? Is Kinetic planning on exporting any non-Italiano scooters (or continuing to import mopeds) to the U.S.?

P2M I also rode the Jupiter maxi scooter. I don’t recall if it had been re-engined by Kinetic or if it was the true Italjet version. It also rode quite nice although the 250cc engine was a bit small for the size of the bike and the 165cc Blaze would run circles around it. Kinetic has done EPA testing for their Nova and that would be the only non-Italjet version that I see coming to the U.S. anytime soon. Kinetic has about 1500 pre-2006 model year TFR mopeds and about 350 pre-2006 Milano (50cc two stroke) scooters that were intended for the U.S. and are still being sold by Cosmo (they are grandfathered in under the EPA rules).

We thank Armando Gonzalez and Kinetic (who vetted his answers) for being so candid with us, and we look forward to hearing more from them!