TVS Motor to rev up south Asian presence

TVS Motor Company Ltd is looking to intensifying its presence in the south Asian markets with production or assembly units in Vietnam, Philippines and Malaysia.

This will come after investments in Indonesia or Thailand is finalised.

"These investments will be made between 2006 and 2010," informed sources told Business Standard.

The need for establishing production or assembly bases in these markets is felt to evolve a proper brand reckoning in the local market through employment generation and developing local supply chain.

The company is currently in the process of deciding on the location of its first facility outside the country and the choice is between Indonesia and Thailand.

The facility with an investment of Rs 50 crore will have the capacity to make 200,000 bikes a month. The idea is to subsequently up the investment to Rs 200 crore in the region in the next three years.

In markets such as Malaysia and Philippines the company may only look at assembly lines, while Vietnam could host another production line. A decision in this direction is expected to be taken by September.

The company that struggled with the phasing out of bikes running on two-stroke engines from the domestic market, has now redirecting the bikes to export market with Africa as prime target.

"We moving to a situation where 90 per cent of our production will be the four-stroke engine bikes catering to the domestic market and 10 per cent will be the two-stroke models for the export market," Venu Srinivasan, chairman and managing director, told Business Standard.

The company's sales of two-stroke bikes has fallen from about 30,000 a month a year ago to the current levels of 12,000 a month. The company was forced to sell the products at its variable costs, repricing them from Rs 32,000-33,000 to Rs 24,000-28,000.

The company spent about Rs 20 crore to scale up its four-stroke production switching over existing facility from two-stroke engines.

Gearing to launch its four-stroke version of Max 100 in September, TVS Motor is hoping to recapture its lost market. "We should sell about 1,20,000 four-stroke version of the Max range in the second half of the current year and do 3,00,000 next year", Srinivasan added.

Targeting a sales figure of 1.4 two wheelers in 2004-05, TVS Motor is also perky about the push Centra and Victor will give to its sales.

"Centra has been designed to capture the popular traditional preference for a small bike. The Victor is more an aspirational product," Srinivasan pointed out.

In the current fiscal, the company is slated to launch the 125cc Victor. In April 2005, the company will make its entry into the three-wheeler segment with the conventional passenger auto rickshaw. An investment of Rs 100 crore is being made at the Mysore plant to provide for this production line.

In the second phase, the company proposes to make diesel load carriers. "We have not decided if the diesel engine will be made in-house or outsourced", he said.

The product mix (in terms of capacities) at TVS Motor is headed to 1.2 million motorcycles, 25 lakh mopeds, 3 lakh Scooty and one lakh autorickshaw by the close of the current fiscal. The three-wheeler production is expected to be doubled in about three years' time.

The two-wheeler industry is expected to grow at 12 per cent per annum over the next 5 years. While TVS is broad-basing its production in the south Asian market, it is not yet ready to move out of its southern base in the domestic scene.

"We could look at opening shop in Madhya Pradesh at the appropriate time when the market warrants such an expansion", Srinivasan responded to query on the company's domestic plans. He is talking of capitalising on the existing automotive culture of Pitampura.

Rs 54 crore steel hit to be made good this fiscal

TVS Motor took a direct hit of Rs 54 crore in its production cost on account of rising steel prices in 2003-04. The total hike in raw material costs was Rs 100 crore. The company managed a late correction by raising the prices of Victor and Centra at the fag end of the year.

But it will be able to make good its losses in the current year, Venu Srinivasan, managing director, TVS Motor, said. While the fear of Chinese imports persists, Srinivasan is not averse to tying up with certain component makers.

"The issue is to find the quality manufacturers," he added. Srinivasan dismissed talks about his personal acquisition of additional stake in TVS Motor as portfolio investment that is not going lend him any extra sway in the shareholding pattern.

"Sundaram Clayton at 58.44 per cent is very comfortably positioned," he pointed out.