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When push comes to shove
Sales figures for november saw HMSI stage a quiet coup in the domestic two-wheeler market as TVS Motor was edged out of its number three perch. Can it claw its way back?
Issue Date - 19/01/2012
Appearances can be deceptive. They may conceal more than what they reveal. At first blush, the Chennai-based $2.2-billion TVS Motor Company’s 7.79% growth for the month of November 2011, in which it sold 1,50,406 two-wheelers, appears to be a fairly good showing, all the more so considering the macroeconomic challenges and the overall poor market sentiment in the Indian market. However, one only needs to look a bit deeper to arrive at a fuller picture. During the festive month of November, the two-wheeler industry grew by 25.27% and its (TVS) arch rivals like Hero MotoCorp and Honda Motorcycle & Scooters India (HMSI) managed to beat the industry trend by registering top-line growth of 27.28% and 59.04% respectively. For TVS, worse was yet to come. The month also saw it ceding its No. 3 slot in the two-wheeler market to HMSI, whose November sales logged 189,970 units.

Sure, the figures are for just the month of November. For the two contenders, the scales of fortune could tip either’s way and there could well be many a slip betwixt the cup and lip in the months ahead. For the past few years and till as late as November 2011, TVS was the third-largest two-wheeler manufacturer with a market share of 14.5%. The company sold 1,282,117 units as compared to the 1,228,987 units sold by HMSI during the April-November period. But the latest coup by HMSI has set tongues wagging. Will TVS be able to claw back the lost ground in the Indian two-wheeler market going ahead?

An e-mail sent to TVS Motor Company for its comments on this story did not elicit any response. But it is worth mentioning here that in October 2009, Business & Economy did a story discussing the fight for the #3 slot in the Indian two-wheeler industry between TVS and HMSI. As far back as two years ago, the magazine made a prediction that has come to be almost prophetic in hindsight. The story in question strongly made a case for TVS to pull up its socks or suffer the fate of watching HMSI vroom ahead. That fate has now come to haunt TVS. Considering the pace that HMSI has picked up of late, TVS will need to pull off a visceral performance and push sales aggressively to come back into the game with its honour intact.

Venu Srinivasan, the Chairman and Managing Director of TVS Motor Company, is not new to facing challenges. In fact, he has a reputation for thriving when the going gets tough. As a student of business management at Purdue University in the US, he spent a summer hawking the Good Book Bible in North Carolina. Despite being the grandson of the founder of the group (T.V. Sundaram Iyengar), Srinivasan started his career with the group as a grunt mechanic and put in a lot of elbow grease before moving up the ladder and becoming the CEO of Sundaram-Clayton (a TVS Group company) in 1979. And it was not before the mid-1980s that he rose to the top and was calling the shots at the two-wheeler manufacturer.

In 2001 when TVS’s collaboration with the Japanese Suzuki came asunder, many thought that the company would die a natural death due to the exit of the foreign collaborator. However, Srinivasan proved his detractors wrong by introducing the ‘More smiles per hour’ TVS Victor and the rest, as they say, is history. At the time of the break-up, the company’s revenue for FY 2001-02 stood at Rs.1.44 billion. In a span of ten years, Srinivasan has taken the company to galvanic heights, earning Rs.63 billion at the end of FY 2010-11. However, the road ahead for the company is expected to get bumpier. As TVS is the flagship company for the group, the workaholic Srinivasan has his task cut out: to achieve its target of selling over 2.5 million two wheelers in FY 2012 from two million sold in FY 2011 and wrest the No. 3 spot back.

On the other hand, HMSI is confident of achieving sales of more than 2.1 million units this financial year. If HMSI is able to meet its desired sales target and TVS is able to sell just about the targeted figure, the industry will see HMSI cement its position among the top three in the Indian two-wheeler market behind Hero MotoCorp and Bajaj Auto. Pushing past TVS in November sales was not a lark for HMSI. For the past couple of years, it has been working to add incremental capacity. But it was not before it opened a new facility in Rajasthan in June this year that it was able to ramp up capacity by 1.2 million units. To expand its capacity further, the company is also spending Rs.13.5 billion on a new plant, which will come up near Bangalore, and will add a further 1.2 million units per annum in capacity. The new plant near Bangalore will open in the first half of 2013 and will allow the company to reach out to more lucrative markets effectively in various states, especially in the southern parts of the country. For information, southern markets contribute to about 30% of the overall two-wheeler demand in the country.

What will make it tougher for TVS to fight off HMSI is also the fact that the latter is gearing up to enter the economy segment (100cc category) where market leader Hero MotoCorp has a stranglehold. It is readying to launch a 100cc bike, which will be showcased at the New Delhi Auto Expo in January and will carry a price tag in the bracket of Rs.40,000-45,000. “Even before Honda broke its ties with the Hero Group, HMSI has been gearing up to take the market by storm. And considering the intense environment in the Indian two-wheeler market, it is HMSI that has the potential to really make an impact in the coming years,” says an auto expert requesting anonymity. With a flurry of new product launches, including economy bikes and scooters – both big and small capacity – and more fuel-efficient engines, Honda is looking to gain market share quicker than expected.

But Srinivasan is not one to give up without a good fight. On its part, TVS has also gone in for capacity expansion and upped its production capacity by 33% to 2.8 million units from 2.1 million units per annum, with an investment of Rs.2 billion. On the product development front, TVS is mulling a low-priced motorcycle that will act as the volume driver for the company in the Indian market. According to company sources, the new bike will be priced at around Rs.25,000, making it the cheapest motorcycle in the country. In other words, it will be the Nano among two-wheelers! But like the Nano, the product may fail to hit it off with consumers considering the fact that more and more motorcycle buyers are increasingly inclined to buy feature-strong executive and premium bikes than plumb for bare-bones entry level commuter bikes. But, according to H.S. Goindi, President (Marketing), TVS Motor, “there is room for introducing one more product at the lower end of the motorcycle segment. Our cheapest motorcycle (TVS Star 110cc motorcycle) comes for Rs.36,000 while the most expensive moped is tagged at Rs.25,000. There might be a new product positioned in this range.” The company has three bikes in the entry-level category including the Sport, Start City and the clutch less ‘Jive’, and two bikes in the above 150cc category, the Apache RTR 160 and the Apache RTR 180.


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