TVS Motor Company CMD Mr. Venu Srinivasan's Interview
It is time for Venu Srinivasan, chairman and managing director of
TVS Motor Ltd, to make a third coming. In the late-1980s, he scripted a
turnaround of the company, which was then mired in labour trouble and
was sinking into the red. Again, after splitting with Suzuki four years
ago, Srinivasan roared back into contention riding on the success of the
Victor. In fact, it came within sniffing distance of becoming the
second-largest player in the motorcycle market.
But that seems a long time ago for TVS, which has become a distant third
now after having lost out on the rapidly expanding entry-level market.
The phase-out of the two-stroke Max and a failure to peg the Centra’s
price to the entry-level segment dealt twin blows.
Still, Srinivasan appears to have lost none of his drive and aplomb. He
is confident of not only challenging Bajaj Auto once again (Hero Honda,
of course, remains a runaway number one) but also matching it in
motorcycle volumes by the not-too-distant September 2006. The road to
that goal is paved with a line-up of new products in all volume segments
of the market, and a new plant each in Himachal Pradesh and Indonesia.
In an interview with Business Standard, Srinivasan held forth on why his
company will give Bajaj Auto reasons to worry. Excerpts:
About two years ago, you came very close to catching up with Bajaj
Auto, the No. 2 player. The gap since then has widened to make TVS Motor
a distant third runner. Is TVS Motor running out of steam?
After the loss of the entry-level two-stroke motorcycle (Max 100) it
took a while for us to fill this void. Only last November we managed to
introduce the Star, which has now started to give us the volumes. The
effort from now on will be to close this gap (with Bajaj Auto) and take
the monthly sales of the Star to 30,000 starting this month. Our target
is to increase the sales of Star to 50,000 units a month.
Then, the cost of producing TVS Centra also went beyond the budget and
it had to be priced higher than its peer models in the market. The
Centra should have been priced around Rs 32,000 and not Rs 38,000. These
are the two major segments in the market. Now we have re-priced Centra
at Rs 35,000.
Now that you have a product for the entry-level 100-cc segment, what
is the overall gameplan to catch up with Bajaj Auto?
The overall strategy is to identify niche products within the volume
segments and identify potential products that will give us volumes. As a
number three player, we have to be quicker in identifying these niches.
For instance, you can find a niche segment in the rural market. We are
planning to re-launch the Fiero sometime early next year. The design may
be redone and it may even get a new name. We may even make it five speed
(add a fifth gear). But then that is not a volume segment and gives only
40,000 units a year.
A new variant of the Star is also in the offing and that could be
launched in July this year. Fresh variants of the Victor, a new
scooterette after Scooty Pep and moped are also in the pipeline. The
overall plan is to gain numbers to match Bajaj Auto's volume, if not
overtake it, by September 2006.
You should also understand that there are brand issues. As a TVS brand
we are only four years old (after the breakup with Suzuki took place;
earlier, TVS followed Suzuki in the branding).
Given that your marketshare (13 per cent) in the motorcycle market
was half of what Bajaj had (27 percent) in 2004-05, don't you think that
the time frame you have given yourself is hard to achieve?
No, I don't think so. This is an achievable target.
What happened to your three-wheeler plans. Were't they due by end of
the last financial year?
That project is still a little away. It may happen in August 2006. It is
just a matter of resources.
There are some talks that you might get into four-wheelers, too. Is
We do not have any plans to make four wheelers. When I had remarked that
there is some space between two-wheelers and four-wheelers, I had merely
said it as an industry person. It is not just twice as challenging to
move up from two- and four-wheelers, it's far more than that. We had
never planned to enter that market.
Is your plan to set up a plant in Himachal Pradesh only aimed at a
national presence in terms of the brand? TVS products have somehow been
seen as a southern brand. Are you trying to correct this by setting up a
plant in the north?
The issue is not just about the brand. It is about significant tax
savings and advantages in terms of logistics.
Historically it has been seen that the volumes in the region go up once
you have a plant there. Even in the case of TVS, the sales in the region
went up after we started second unit in Mysore (Karnataka). We will be
investing Rs 90 crore in the Himachal plant that will produce 2.5 lakh
units a year.
Would all these savings in cost mean that price cuts can be expected?
That won't happen. There will be no price cuts.
You also had a scooter called Spectra in your portfolio. Are there
any plans to enter this market since scooter sales have shown signs of
picking up volumes of late?
Yes we did have a product but we do not have any immediate plans for the
How are your plans for setting up a unit in Indonesia shaping up?
What kind of products do you plan to make there?
Indonesia and in several Asean countries, there is a huge market for
step-throughs. The market is around six million units in the Asean
region itself. We plan to make around 2.5 lakh units of step-throughs in
this plant. It is a Rs-250 crore project that could be scaled up to Rs
500-600 crore in the next five years.
How do you propose to fund this?
We have already arranged for a line of credit for $100 million. A part
of this money will also be used for our third plant proposed in Himachal
Given the way the market is composed today, doesn't it leave out any
scope for inorganic growth?
Why look at only the domestic market? Expansion could happen anywhere in
the world, like what we are doing in Indonesia.
So are you eyeing any such buyout outside the country?
No. Our plans for Indonesia are just one big step for now.
Any serious plans for exports?
Exports are picking up. We are targeting around 70,000 units this year.
The total current export from India is around 3.5 lakh units.