TVS Motor hopes Indonesian arm will break-even next year

TVS Motor Company hopes its Indonesian subsidiary, which has been reeling under losses, will achieve cash break-even next year.

PT.TVS Motor Company Indonesia, set up in 2007,“continues to have losses,” said Mr Venu Srinivasan, Chairman and Managing Director, TVS Motor.

“We plan to restructure the business and bring down losses by the second half of this year and achieve cash break-even next year.”

The turnover of the subsidiary rose 25 per cent to Rs 85.36 crore in 2010-11.

Operating losses were Rs 39.84 crore, compared with a loss of Rs 64.23 crore in FY10. Net loss was Rs 62.33 crore.

At the company's 19th AGM, Mr Srinivasan said TVS continues to repose faith in Indonesia as the “quality improvements seen in India in terms of styling and durability are driven by experiences in Indonesia, which is highly quality conscious.”

The way to do well in Indonesia is by selling quality products, said Mr K.N. Radhakrishnan, CEO, TVS Motor.

“About 98 per cent of the Indonesian market is dominated by Japanese brands. It is difficult for people to move to new brands. It will take time.”

TVS has 50,000 customers in Indonesia. The company also exports to the Philippines from Indonesia.

On overall market conditions, Mr Srinivasan said TVS Motor is cautious about the next six months.

“We are controlling costs. But salaries are high in the auto industry, growing at 12-15 per cent.”
Domestic business

TVS Motor has planned a capex of Rs 150 crore for FY11-12 on product development, R&D and capacity enhancement in India.

“This year, we will capitalise on last year's launches. Significant launches will happen only by the end of this year or early next year,” said Mr Srinivasan.

In FY10-11, TVS' two-wheeler business grew 32 per cent. The company expects to cross sales of 2.5 million two-wheelers this year (2 million FY11).

The company hopes the restructuring of its finance arm (TVS Credit Services) will give a fillip to two-wheeler sales.

“Last year, we suffered due to poor availability of finance to consumers,” said Mr Srinivasan.

TVS Motor, which has a 15 per cent share in the two-wheeler market in India, is aspiring for number two position, Mr Srinivasan said.
Exports

Exports grew 37 per cent in FY11, driven by South Asia, Africa, Brazil and Mexico. Three-wheelers significantly strengthened exports.

TVS Motor recently entered Egypt (three-wheelers) and Columbia (two-wheelers).

It is in the process of entering Argentina.