 "Ready for the dirt track")
Jupiter, the newly launched scooter from TVS Motors, has sold more than 500,000 units since it was launched a year and a half ago. The company claims this is the fastest ride to the 'five lakh' mark any scooter in India has had so far; and buoyed by its success and that of other newly-launched brands, it has embarked upon an aggressive campaign to increase market share in the country's fast-growing two-wheeler market. While analysts and industry observers say that the company is being unrealistic in its ambitions, TVS is confident that its scooters will soon be racing with the wind.
In a year, TVS expects to corner 14.5 per cent share of the two-wheeler market. Currently it has 13.2 per cent (year ended 31 March 2015). In 2014-15, TVS outperformed the domestic two-wheeler industry by reporting 20 per cent growth as against the industry's 9 per cent. During the fourth quarter of 2014-2015, its market share improved by 70 basis points (bps) year on year to 12.8 per cent, while for the whole year, it rose by 140 bps to 13.2 per cent.
The brands that powered its growth were recent launches such as the Jupiter, Scooty Zest and Star City+. While the company will continue to focus on these, it is also planning to upgrade its existing brands giving them a new look and more engine power.
What helped the company power ahead in the year gone by , it says, was market and dealership expansion. Hefty advertising and brand building exercises have also helped. In 2014, TVS spent around 5 per cent of its turnover on advertising, as compared to Hero's 2.2 per cent and 1.4 per cent of Bajaj (albeit on much larger revenues), say analysts. For instance, while TVS spent around Rs 460 crore on brand building, Hero spent around Rs 470 crore.
The company has positioned Jupiter as an alternative to Honda Activa. Pitched as a scooter for males, it helps build a more comprehensive portfolio of scooter brands as TVS already has Scooty for young women and Wego, a unisex product. Other launches are also aimed at creating a more diversified set of offerings: Star City+, for instance, is meant for the 110cc segment and Scooty Zest, in the same segment, is for young women looking for a powerful scooter.
Two new models are expected this year - one is the re-launch of TVS Victor and another, a premium bike. Victor used to be its bread-and-butter product before being discontinued a few years ago. The new version is likely to be in the 110cc category and is targeted at the executive riders segment.
TVS Motors, however, has reduced the domestic industry volume outlook for 2015-2016 to 3-5 per cent as against 7-8 per cent projected earlier. Bharat Gianani of Angel Broking says that given that the industry would grow around 3-5 per cent, to achieve its target, TVS would have to grow at around 18-20 per cent, which is difficult considering that the rural market, which accounts for around 40-45 per cent of industry's volume, has slowed.
The company differs. Existing products and markets will help gain market share, says Radhakrishnan. Also, he is confident that the company will continue to invest in the suite of brands and back this up with innovation and product development.
The company claims it does not believe in discounts, but will invest in brands. "We need to invest consistently for higher volumes and market share," says Radhakrishnan. Volumes have gone up sharply, from 400,000 to 600,000, in the last five years. Radhakrishnan adds, "The pull for our products is extremely good, in domestic and international markets."
Analysts, meanwhile, point out that there are a few speed-breakers on the way. Gianani believes that Jupiter can take on Honda's Activa, but the issue is spending on brand and the company's low reach. "If you look at percentage terms (amount spent on brand-building within total revenue) it will look high, since volume is low, but in absolute terms it is lower than the competition," says Gianani, who estimates that at the most TVS can go up by 50-60 bps in terms of market share in the current fiscal.
The two-wheeler maker has said that it will invest around Rs 350 crore in 2015-16 to increase its production capacity to around 3 million units from the current 2.8 million units a year, towards new product development including the venture with BMW and towards maintenance expenditure.
Gaurang Shah of Geojit BNP Paribas Financial Services in an earlier interview said that in the last one year, TVS Motors has performed much better vis-a-vis companies like Hero Motocorp or Bajaj Auto. The realisation per vehicle grew by around six per cent year on year to Rs 40,658, led by a better product mix and price hikes.
Analysts agree that when it comes to quality and services, TVS tops the table. However, the issue is lack of strategy and product designs, where companies like Honda have scored, says an analyst.
A lot is also riding on its tie up with BMW Motorcycles for 500cc motorcycles. If this product is successful, the two could launch either 350cc or sub 300cc motorcycles which could open up the skies in terms of the company's ambitions.
CROWD-PULLERS
In a year, TVS expects to corner 14.5 per cent share of the two-wheeler market. Currently it has 13.2 per cent (year ended 31 March 2015). In 2014-15, TVS outperformed the domestic two-wheeler industry by reporting 20 per cent growth as against the industry's 9 per cent. During the fourth quarter of 2014-2015, its market share improved by 70 basis points (bps) year on year to 12.8 per cent, while for the whole year, it rose by 140 bps to 13.2 per cent.
The brands that powered its growth were recent launches such as the Jupiter, Scooty Zest and Star City+. While the company will continue to focus on these, it is also planning to upgrade its existing brands giving them a new look and more engine power.
What helped the company power ahead in the year gone by , it says, was market and dealership expansion. Hefty advertising and brand building exercises have also helped. In 2014, TVS spent around 5 per cent of its turnover on advertising, as compared to Hero's 2.2 per cent and 1.4 per cent of Bajaj (albeit on much larger revenues), say analysts. For instance, while TVS spent around Rs 460 crore on brand building, Hero spent around Rs 470 crore.
The company has positioned Jupiter as an alternative to Honda Activa. Pitched as a scooter for males, it helps build a more comprehensive portfolio of scooter brands as TVS already has Scooty for young women and Wego, a unisex product. Other launches are also aimed at creating a more diversified set of offerings: Star City+, for instance, is meant for the 110cc segment and Scooty Zest, in the same segment, is for young women looking for a powerful scooter.
Two new models are expected this year - one is the re-launch of TVS Victor and another, a premium bike. Victor used to be its bread-and-butter product before being discontinued a few years ago. The new version is likely to be in the 110cc category and is targeted at the executive riders segment.
TVS Motors, however, has reduced the domestic industry volume outlook for 2015-2016 to 3-5 per cent as against 7-8 per cent projected earlier. Bharat Gianani of Angel Broking says that given that the industry would grow around 3-5 per cent, to achieve its target, TVS would have to grow at around 18-20 per cent, which is difficult considering that the rural market, which accounts for around 40-45 per cent of industry's volume, has slowed.
The company differs. Existing products and markets will help gain market share, says Radhakrishnan. Also, he is confident that the company will continue to invest in the suite of brands and back this up with innovation and product development.
The company claims it does not believe in discounts, but will invest in brands. "We need to invest consistently for higher volumes and market share," says Radhakrishnan. Volumes have gone up sharply, from 400,000 to 600,000, in the last five years. Radhakrishnan adds, "The pull for our products is extremely good, in domestic and international markets."
Analysts, meanwhile, point out that there are a few speed-breakers on the way. Gianani believes that Jupiter can take on Honda's Activa, but the issue is spending on brand and the company's low reach. "If you look at percentage terms (amount spent on brand-building within total revenue) it will look high, since volume is low, but in absolute terms it is lower than the competition," says Gianani, who estimates that at the most TVS can go up by 50-60 bps in terms of market share in the current fiscal.
The two-wheeler maker has said that it will invest around Rs 350 crore in 2015-16 to increase its production capacity to around 3 million units from the current 2.8 million units a year, towards new product development including the venture with BMW and towards maintenance expenditure.
Gaurang Shah of Geojit BNP Paribas Financial Services in an earlier interview said that in the last one year, TVS Motors has performed much better vis-a-vis companies like Hero Motocorp or Bajaj Auto. The realisation per vehicle grew by around six per cent year on year to Rs 40,658, led by a better product mix and price hikes.
Analysts agree that when it comes to quality and services, TVS tops the table. However, the issue is lack of strategy and product designs, where companies like Honda have scored, says an analyst.
A lot is also riding on its tie up with BMW Motorcycles for 500cc motorcycles. If this product is successful, the two could launch either 350cc or sub 300cc motorcycles which could open up the skies in terms of the company's ambitions.
CROWD-PULLERS
- The total scooter/scooterette/moped market is estimated at around 5.4 million units
- Honda Motorcycles, TVS Motorcycles and Hero Motocorp are the major players
- Others, with market shares of 5 per cent and less are: Suzuki Motorcycle, Yamaha Motor and Mahindra & Mahindra