Will A New Strategy Accelerate TVS’ Performance?

There’s a radical difference between standing on a podium and being a runner-up for the obvious reasons. No different must it be for TVS Motors when it was overtaken by Honda and toppled off its third place in terms of sales volume. It’s been a bad year for TVS with declining sales numbers, being overthrown from its position and a quarter of poor financial performance - all of this in the middle of a stormy environment for the entire industry to operate in.

The Problem

Although the macro economic conditions have been weak and poor and inconsistent growth has been the recent trend for everyone, the situation has been quite different for Honda which has been posting a consistent above 45 per cent growth in every month of FY13. The point of bringing Honda up in this is to validate the fact that there is demand but copious amounts of it is being binged on by Honda. So where is TVS lacking?

In the 75-110 cc category the company has models like Star City, Sport and Jive. These models are not able to beat the stronghold of Hero and Bajaj which have models like Splendor and Discover 100 in the running. This is mainly because TVS’ products in this price-sensitive category are priced higher than the competition.

The 110-125 cc segment, which is growing rapidly, has a market share roughly divided amongst Hero, Bajaj and Honda in equal percentages. These three companies account for more than 90 per cent of the total market share. TVS’s Flame, the only bike with auto clutch, hasn’t fared well here and the company needs a new launch in this category to gain pace.

Meanwhile, in the 150-220 cc segment, while two-wheeler makers have three to four brands in this category (Hero’s Achiever, Hunk, Impulse, Karizma and Bajaj’s Discover, Pulsar, Avenger), TVS’ presence is limited to the Apache series. The segment where features and styling take importance over pricing, the company fails to provide customers with enough choice. Moreover, TVS lacks a strong brand that would cater to different segments like Splendor and Super Splendor of Hero or the Discover and Pulsar series of Bajaj.

In scooters too, TVS has failed to give tough competition to Honda’s Dio, Activa and Aviator or Hero’s Pleasure and Maestro with its Wego in the 100 cc segment. It also doesn’t have a presence in the 125 cc segment where Suzuki’s Access has performed well.

The Strategy

TVS plans to launch new motorcycles and scooters across various categories in the next 18 months to strengthen its position and regain its spot. The company plans to launch a model in every quarter. As mentioned earlier of the need of a model to be launched in the 110-125 cc segment, the company plans to launch Phoenix on September 28, 2012. This bike will give TVS a presence in the premium category where Hero’s Passion and Honda’s Shine have been performers. Moreover, the company also hopes for its Indonesian arm to achieve cash break-even by the end of the fiscal. This would result in supporting the company’s financials which have been weighed down by losses from Indonesia, among other factors.

Apart from launching new models to strengthen the product offering, TVS also plans to reduce the number of platforms to reduce costs. Having common platforms (same basic interiors and fixtures) would result in consolidation through suppliers with a reduction in the overall part count and thus improve efficiency. This move would help the company to work on its margins and improve profitability significantly.

Though the cost-cutting strategy is definitely a good move and would help the company largely, its success on strengthening its product portfolio would depend highly on how it is positioned and how it is relative to competition. Though the launch of Phoenix seems to be in the right direction, what happens with the rest of the portfolio will be known only once these models are launched.