TVS to spend $32 million to increase capacity & develop new products

TVS Motor Co., India’s third-largest motorcycle maker, plans to spend as much as 1.5 billion rupees ($32 million) to add capacity and develop new products this financial year as demand increases.

The company will boost maximum production of motorcycles, scooters and mopeds by 17 percent to 2.8 million units a year by March, S.G. Murali, executive vice president, finance, said by phone yesterday. Three-wheeler capacity will rise 80 percent to 90,000 units at the Chennai-based company, he said.

TVS Motor in November unveiled an automatic Jive motorcycle and Wego scooter, spurring sales, as economic growth and higher disposable incomes boost consumer spending in the world’s biggest market for motorcycles after China.

“A huge middle class, double-income families in larger towns and people requiring mobility point to a huge growth in the market,” said Murali. “There is enough money in the rural market with government spending on infrastructure.”

The company, including units, reported profit of 335.2 million rupees in the year ended March 31 after posting losses in the previous two financial years, according to its website. Murali declined to say how much he expects profit to grow in the current financial year.

Two-Wheeled Boom

Per-capita incomes have almost doubled in the past five years in India. The nation’s economy has grown an average 8.5 percent annually during the past five years and will probably expand at a 9 percent pace by the year ending March 31, 2012, Prime Minister Manmohan Singh said at a June summit of the Group of 20 countries in Toronto.

The company expects to sell 1.95 million motorcycles, scooters and mopeds in India and abroad in the year ending March 31, 2011, or 30 percent more than the year-earlier period, Murali said, declining to provide a break up. Sales of three wheelers may more than triple to 50,000 units from 15,000 last year, he said.

TVS Motor will pay for the capacity addition from its cash reserves, Murali said. It had about 3.5 billion rupees in cash and short-term investments at the end of March, he said.

Industrywide sales of motorcycles may increase by 9.5 percent to 8.04 million units in the year to March 31, the Society of Indian Automobile Manufacturers said in July. Scooter sales are forecast to rise 13.7 percent to 1.66 million units