Piaggio launched its famous Vespa scooter in India on Thursday, making a $50 million bet that a luxury scooter market will thrive on the broken, throbbing roadways of Asia's No. 3 economy.
The Italian company has spent $30 million on a new factory in Baramati, in the state of Maharashtra, and plans to spend $20 million more to double capacity to 300,000 scooters a year by 2013
The Vespa LX will cost around 66,661 rupees ($1,282) in India, the lowest Vespa sticker price in the world but still a 40 percent premium to the average cost of a scooter here.
Aspiring scooter buyers, however, have been willing to pay premiums that drive the cost of some popular scooters to near 60,000 rupees to avoid monthslong delays in delivery.
"With its India foray, Piaggio will create an exclusive, premium segment," said Ravi Chopra, chairman of Piaggio's Indian subsidiary. "The price tag will be secondary as the pride of ownership will be foremost."
Analysts have been skeptical that a premium scooter can succeed in India where the bikes are prized for being low cost and able to nimbly navigate clogged streets.
"Their big gamble is trying to position this scooter as a lifestyle product, not a utilitarian product," said Deepesh Rathore, auto analyst for IHS Global Insight in New Delhi.
In a nod to cost conscious Indian consumers, Piaggio put a lower premium on the scooter here than in other markets and designed a new engine which gets 60 kilometers a liter (141 miles/gallon) _ roughly double the mileage of existing models in Europe. Piaggio plans to produce the new engine in Europe and some Asian nations.
In Europe, the Vespa LX sells for about 3,000 euros ($3,960), which chief financial officer Gabriele Galli said was about a 50 percent premium to other brands.
In Vietnam, the Vespa LX sells for around 66 million dong ($3,168), more than double the price of the average bike, said Constantino Sambuy, president of Piaggio in Vietnam.
"I'm keen on getting one," said Husain Vahanvaty, 26, who works in his family's steel trading business in Mumbai. "You get the Italian look and some very vibrant colors that are not in the market. That's the most attractive thing. And now they're giving you mileage of 60, that's bloody brilliant."
Piaggio has made an aggressive push into Asia. It opened a factory in Vietnam in 2009, where it doubled capacity last month to 300,000 scooters. In the last two years, it has launched operations in Thailand, Malaysia, Taiwan and Indonesia. Its China joint venture, started in 1995, has a factory in Guangdong that can make 500,000 bikes a year.
Piaggio's revenues from Asia grew 41 percent in 2011 on a 76 percent jump in sales volume.