When the Throttle Sticks: A Case Study

What KTM’s near-collapse reveals about belief, leverage, and who really holds the keys.

The factory lights in Mattighofen had gone dark again. Not for maintenance. Not for holidays. This time, the bikes weren’t moving because there was too many of them. Inside KTM’s Austrian headquarters, suppliers were calling, creditors were waiting, and inventory was gathering dust.

After a decade of high-performance growth, the engine had seized.

Setting the Pace

In 2022, KTM looked unstoppable. Record sales. A new North American HQ. More brands under its belt — from GasGas to MV Agusta — and more product lines in every category. The company was no longer just building motorcycles; it was building an empire.

At the center of it all was Stefan Pierer. Founder, majority owner, CEO. The man who had saved KTM from bankruptcy in the 1990s was now turning it into a global mobility conglomerate. Or so it seemed.

The company was “ready to race,” as the tagline went. But when the race changed, it couldn’t adjust.

Built for the Straightaway

When COVID hit in early 2020, KTM did what smart operators do in a crisis. It paused production, leaned on government support, and focused on survival. But to everyone’s surprise, demand bounced back fast. People wanted to be outside. Off-road bikes, e-bikes, anything with wheels — it all sold.

KTM caught that wave. It didn’t just ride it — it built a whole new vehicle on top of it.

More models. More tooling. More suppliers. More debt. The factory lines kept running, and the company assumed this new demand was structural. By 2021 and into 2022, they were producing motorcycles as if the boom would last forever.

But by late 2022, cracks were forming. Interest rates climbed. Consumer financing tightened. Inflation ate into wallets. KTM's core markets — the U.S. and Europe — softened fast.

Internally, the warnings were there. Free cash flow flipped negative. Dealers began pushing back on inventory. But production continued. Units piled up. Marketing spend kept flowing.

And quality began to slip.

Momentum looks like control — until the turn comes.|

Thrown Over the Handlebar

As a KTM dealer you’d remember it clearly. A shipment of 2023 models arrived, but no one was asking for them. Your floor was still full of 2022s. KTM told you not to worry — demand would return. In the meantime, they offered extended payment terms. More bikes, more debt, same bet.

And you weren’t alone. By early 2024, KTM had racked up more than 265,000 unsold motorcycles — nearly a full year’s worth of global sales — sitting in lots and warehouses. Discounts got steeper. Terms got longer. But the bikes just kept coming.

By mid-2023, even KTM’s executives couldn’t deny what was happening.

One board member said the quiet part out loud:

“We damaged the KTM brand with overproduction and quality problems”

The share price tanked.

And he wasn’t wrong. There were growing complaints about build issues. Warranty claims stacked up. Forums that used to gush over KTM’s racing DNA were now filled with frustration.

It wasn’t just the money. It was the erosion of trust — the intangible thing a brand lives or dies by.

Behind the scenes, cash was running out. In late 2024, production stopped. Not as a cost measure — as a last resort. The company couldn’t afford to keep building bikes no one was buying.

Restructuring followed. Creditors were asked to accept 30 cents on the euro. Hundreds of jobs were lost. KTM’s Austrian facilities fell quiet again, this time with no clear path back.

The Capital Was Ready. Non-Negotiable.

Pierer tried to find external investors. The usual suspects passed. Too much debt. Too much risk. The story was spinning in mud.

Only one player was willing to step in: Bajaj Auto.

The Indian manufacturer had been a long-time KTM partner, producing smaller bikes in Pune and holding a quiet economic interest through a joint holding company. But they weren’t in it for quick returns. Bajaj had scale, liquidity, and operational alignment — and they saw a strategic opportunity others didn’t.

This wasn’t distressed investing. It was a long-term bet on a brand they knew intimately, backed by years of operational data and firsthand exposure to the business.

By early 2025, Bajaj arranged a rescue package worth €800 million, enough to meet the creditor payment deadline and restart production.

In return, Bajaj secured the right to take full control of the company.

Pierer stepped down. The factory he’d once saved would now run under someone else’s playbook. The vision that built the brand — fast bikes, big bets, belief in the product above all — had been replaced by something more measured. Leaner. Safer. Globalized.

After three decades at full throttle, Pierer’s race ended in a crash.

The Cost of Conviction

KTM didn’t collapse because it lost its market. It collapsed because it took a levered bet on momentum, ignored the data, and scaled belief into something the balance sheet couldn’t support.

It’s easy to admire what Pierer built. He created a brand that mattered. But he also created a company that couldn’t slow down — that was structurally unable to throttle back when demand softened. The capital structure was tight. The governance was centralized. The risk controls weren’t there.

When the wheels came off, it was capital, not belief, that kept the company upright.

Bajaj stepped in because they could. As an unlevered industrial with billions in cash and years of operational intimacy with KTM, they didn’t need to call a bank or hedge their bet. They had the balance sheet — and the conviction — to act when no one else would. They wrote the check, and with it, took the keys.

This is the lesson for operators and allocators alike: control follows capital. Always has, always will.

But there’s something deeper here too.

Belief is a kind of leverage. It propels you forward. It raises money, hires staff, wins customers. But belief without constraint, without brakes, is dangerous. When it outpaces data, it becomes a liability. And in a high-fixed-cost, inventory-heavy business, that liability becomes existential.

In the end, that’s what made the difference.

Not just belief, but a robust balance sheet.

Building something ambitious? Don’t wait for the brakes to fail. Book a strategy call to stress test your capital plan and make sure your balance sheet is built to last.

This piece was originally posted on my Substack newsletter on capital, strategy, and founder-aligned finance: Conduit of Value