Market upswing surprises TVS Motor

To invest Rs 100 cr to increase capacity.

Mr Venu Srinivasan

M. Ramesh

Chennai, Aug. 10

For Mr Venu Srinivasan it is “a better problem to have”.

Caught by surprise at the market upswing, the company (indeed like many others in the automotive industry) is grappling with the problem of getting its supply chain pump in more.

“Who would have expected this kind of market growth,” the Chairman and Managing Director of TVS Motor Company, told Business Line today.

In July, the company produced the highest ever number of two wheelers — 1,65,000 — but the record would be broken by August.

Come the year-end, TVS Motor will be spot-on, or at least pretty close to, its dream sales figure of one million motorcycles. “We are producing 10,000 WeGos (a month),” he said, referring to the 110-cc gearless scooters that the company launched last November. “We should be doing at least 15,000.” Similarly, the company is “stuck with 3,000” on its three-wheelers, whereas the market pull is for 5,000.

Supply chain ramp up

The issue the company is facing is this: sensing the market upswing, TVS Motor is investing Rs 100 crore in expansion, taking the total capacity from twomillion to three million. But how many of its tier-II and tier-III suppliers can ramp up?

“For about 18 months, they had no business. Now, they have to run a race,” admits Mr Srinivasan.. TVS Motor has to try all the tricks in the book to sprint with the market. For instance, “we air-freighted 2-3 (types of) components for two months,” from Taiwan and China.

All this has resulted in “rationing of products” to dealers, which “is neither good for the dealer nor for the manufacturer, because all your selling skills go away,” Mr Srinivasan said.

But he is convinced that the supply chain will also ramp up. The problem will get resolved in August and in the following months, the company will ask its dealers to stock up for the festival season.

TVS Credit

It is here that Mr Srinivasan sees a big role for the group's new finance company, TVS Credit Services, because “taking along with you your own finance company significantly eases the ability of the customer to buy.”

But aren't there enough financiers in the market already? True, says Mr Srinivasan, but a captive finance company could structure funding around customers' needs. For instance, if a dealer needs to increase his floor stock in a busy market — here is the finance. Come a dull season when other financiers are not keen, “we can open the tap.” Mr Srinivasan is convinced that the two-wheeler market would achieve a steady-state growth rate of 15 per cent. The happening development of public transport-spruce up — metro rails — will not, according to him, dampen the two-wheeler market. “There is a huge demand from semi-urban and rural areas,” he said.

Hence the Rs 100-crore expansion in capacity.

Asked if TVS Motor would put up a greenfield facility, Mr Srinivasan said, “In India, a greenfield site is out of question.”