Zooming ahead on scooters: How TVS Motor beat the industry slump

Fiscal 2019 was one of the toughest for the two-wheeler industry, especially for scooter makers. For the first time in a decade, sales dropped due to demand slowdown across urban markets, thanks largely to price reduction by motorcycle manufacturers focusing on the commuter segment.

Against the overall gloom, TVS, the second largest scooter maker, posted a gain in market share — to 18.52 per cent of the 67,01,469 units market in 2018-19 from 16.36 per cent in 2017-18. That’s noteworthy given that larger players, including market leader Honda and the third largest player Hero, reported a dip in their shares.

In volume terms, TVS Motor sold 12,41,366 units in FY19, compared to 10,99,133 units in FY18, a growth of 12.94 per cent. In contrast, market leader Honda sold 36,80,403 units in 2018-19, against 38,21,542 units the previous year, registering a decline of 3.7 per cent, as per Society of Indian Automobile Manufacturers (SIAM) data. Honda’s share in the overall market dipped to 54.92 per cent from 56.87 per cent. Likewise, the third biggest player Hero MotoCorp also witnessed a decline in market share to 10.73 per cent in FY19 from 13.15 per cent in FY18.

Even in April 2019, TVS’ scooter sales grew 9 per cent to 97,323 units from 89,245 units in the same period last year, says the company. According to SIAM, TVS’ domestic market share in April 2019 rose to 18.83 per cent from 12.95 per cent in April 2018, while Honda’s market share dropped to 56.18 per cent from 64.07 per cent in the same period. Hero’s market share dropped to 6.89 per cent from 10.60 per cent.

Now look at the big picture. SIAM says scooter sales in India stood at 67,01,469 units in 2018-19, against 67,19,909 units in 2017-18, a decline of 0.27 per cent. In 2010, scooters accounted for 15.6 per cent of the total two-wheeler sales, which rose to 33.3 per cent in 2018. In the first three months of 2019, it dropped to 31.6 per cent.

Two factors have impacted scooter sales. First, the rising cost of ownership — by 10-12 per cent led by fuel prices and insurance cost. There has also been a significant price reduction in the commuter bike category, which has, in turn built up pressure on the scooter category, K N Radhakrishnan, director & CEO, TVS Motor, explained during a recent earnings call.

A related factor is the reduced liquidity among NBFCs, which means there is less money to be lent to finance purchases.

So what’s TVS’ secret sauce? TVS Motor continues to outperform the industry led by launch of new products with exciting features and competitive pricing, says Kotak Securities. TVS, which consolidated its position amongst the top two-wheeler manufacturers in the country in recent years, says quality and product offerings are the two pillars of its market strategy. 

First let’s look at the product strategy. TVS has lacuhed a slew of products in this market in recent years. Its first scooter brand was the Scooty launched in 1994, followed by the Wego (2009) and the Jupiter (2013) for the mass market. In between, it also launched the Scooty Zest to strengthen the Scooty brand. In less than five years, Jupiter managed to hook 2.5 million customers and today boasts of a customer base of over 3 million. The company launched two editions of the brand — Jupiter Classic and the newest, Jupiter Grande.

Now TVS is strengthening the portfolio for the aspirational customer, who wants performance and features and wishes to also make a style statement. The TVS NTorq 125, launched in February 2019, has all that and marks the company’s foray into the 125-cc scooter segment. The brand crossed 100,000 unit in sales in under six months of launch. The features on the TVS Ntorq are a segment first, though the price — at Rs 58,252 ex-showroom, Delhi — is on par with competitive brands like the Honda Grazia and the Suzuki Access 125.

With these two products — Jupiter and NtorQ — TVS Motor is in a sweet spot —they have helped the company to significantly increase its scooter market share, besides giving it an image uplift.

While they were essentially aimed for rural markets, scooter have increasingly found appeal among urban cutomers, as they are both multi-use and convenient to manoeuvre. “With urban demand likely to pick up this year, we are confident that scooterisation and scooter category share will pick up pace,” says TVS’ Radhakrishnan. He says growth will pick up in the rural markets led by a pickup in demand from urban areas. “We will do much better than the market and will delight customers with our new launches in 2019-20,” says Radhakrishnan, without sharing details of the new launches. Suppliers and analysts who track TVS indicate the company might be looking at a 125-cc version of the Jupiter to take on competition. Competition in the segment is going to intensify because as many as five new products are expected to hit the market this year. 

Hero MotoCorp just launched the Maestro Edge 125, India’s first scooter with fuel injection technology, and the Pleasure+ 110, strengthening its scooter portfolio. Markus Braunsperger, chief technology officer, Hero MotoCorp, says with the introduction of three strong products, the company has laid out a strong road map to accelerate growth in the scooter segment.

TVS is also planning to launch its first mass production electric scooter in India this financial year, says Radhakrishnan. The company unveiled the Creon electric scooter concept at the 2018 Auto Expo. With a new variant, TVS also aims to make the Ntorq more accessible for the mass market.

Besides products, the other focuses area for TVS would be to enable finance, which has been one of the major challenge last year. Today the penetration of the retail finance arm of TVS has gone up from 38 per cent to 44 per cent. “Retail finance will be very critical and the TVS Credit Services has done extremely well till now,” says Radhakrishnan. The company also expanded its network by adding 150 primary dealers and a similar number of sub dealers.

To be price competitive and to improve profitability, TVS is working to reduce costs through value engineering, localisation, platform consolidation, and a host of related efforts (such as lower marketing spend to sales).