TVS Motor bets big on rural buyers in south India

TVS Motor Company, India’s fourth-largest two-wheeler maker, is banking on rural buying in south India to sustain its double-digit growth momentum and plans to invest Rs 600 crore to expand its product range and distribution network.

Demand for the brand remains strong, the company said, with retail volumes growing over 20% during Dusshera and Diwali and the momentum is expected to continue. TVS Motor’s two-wheeler sales grew 14% in the first half of the financial year, exceeding the market rate.

Even after the wholesale push ahead of the festive season, stock levels are at a very reasonable level, indicating that strong retail offtake is intact, SG Murali, outgoing CFO of TVS Motor, told ET.

“Festival season for us has been good — we have grown across products, the mood is bullish, stock levels at the dealer are very reasonable. We would like to continue our doubledigit growth for the rest of the year,” said Murali. Dealer inventory levels are about 30 days currently, he said.

“South India was yet to come back fully in the rural areas. With good rains in Karnataka over the last couple of months, fairly decent rain in Tamil Nadu in October and hopefully in November, I think, the strong demand in rural areas of South India will come back in the current quarter,” Murali said.

TVS Motor plans to invest Rs 600 crore in the current financial year in developing new vehicles. The company added 150 dealers in the first half of this financial year, which will start bringing in incremental sales volumes. TVS Motor had 4,200 dealers/sub-dealers at the end of September.

The company’s market share in the domestic two-wheeler segment increased 30 basis points in the first half from a year earlier. The operating profit margin is on track to reach double digits in the fourth quarter, the company indicated on an analyst call.

Demand in Africa, a key export market for the company, has improved with the rise in oil prices. Export volumes grew 29% in the first half from a year earlier, the company told analysts.

TVS Motor started export of motorcycles to BMW globally from the third quarter of the year ended March 2017 and these shipments are now at about 2,000 units per month.

It exported 11,000 vehicles in the first half compared with 4,000 a year earlier. TVS had agreed with BMW Motorrad in April 2013 to jointly design and develop high-end bikes.

The company paid `16.5 crore to dealers in the April-June quarter this year to compensate them for uncertainty ahead of the implementation of the Goods and Services Tax on July 1. The company gave additional discounts of `6.5 crore to clear inventory in that quarter.