TVS Motor looks at Rs 650-crore investment in FY20

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Published: May 2, 2019 12:31:32 AM

Though scooter segment saw decline in its sales last fiscal, the company expected demand to revive in the coming months, particularly strong revival in urban markets again.

The company will also better the industry’s growth in current fiscal, too.

TVS Motor Company said that it would invest `650 crore in the current financial year towards BS VI technology, new products and capacity expansion. The company said it would ensure dealers will not be burdened with inventory due to changing emission norms with effect from April 1, 2020. The company will also better the industry’s growth in current fiscal, too.

At a concall after fourth quarter (Q4) results, director and chief executive officer KN Radhakrishnan said: “We will be investing around `650 crore in the current fiscal, primarily towards BS VI technology. Part of the investments will also be towards new products as capacity expansion wherever needed.”

“While we see demand will be slower in Q1 of the current fiscal, owing to volatile market conditions, however, we expect Q2 and Q3 will see pickup in demand for two-wheelers due to normal monsoon, better liquidity availability as well as festival season. Though Q4 will be challenging, given the push towards BS VI norms, but overall, we expect the industry to post a decent single-digit growth in FY20 and TVS Motor as usual expects to outperform the industry’s growth.”

“We also anticipate that the government will bring down GST (goods and services tax) rates on the industry from 28% to 18%, which would augur well for the industry further to gain the growth momentum.”
Admitting the current inventory level is a cause of concern, he said, however, the same was expected to improve once the stability of the government comes into place as well as due to normal monsoon. “We have an inventory level of five weeks, which is much better than the industry average. We expect to do well on this front, given the demand pickup in Q2 and Q3,” he said.

According to him, “We are working on plans to cut the inventory level further during the fiscal and ensure that the dealers will not be burdened. We will also ensure that we will not lose our value/brand equity by discounting our products to push sales. We will be much ahead of others in bringing out BS VI vehicles for smooth transition towards new emission norms.”

He said the company would pass on the cost impact, owing to BS VI emission norms, introduction of anti-lock braking system (ABS), among other technology developments, to customers. The introduction of ABS across premium bikes (Apache) will carry an additional cost of around `6,500. Similarly, there is going to be cost increase across products due to new emission norms, he added.

On the export front, he said, “We would continue to do well on the export front, given the new products entry into newer markets as well. The exports contribution to our overall sales have gone up from 21% in FY18 to 24% in FY19 and we hope to do better in the current fiscal, too.”

Though scooter segment saw decline in its sales last fiscal, the company expected demand to revive in the coming months, particularly strong revival in urban markets again. The current slowdown in this segment was a temporary setback which would see strong revival, going forward, he added.

On the BMW and electric vehicle (EV) side, Radhakrishnan said, “Under the BMW tie-up, all the products are doing well and we expect to launch one more product during the fiscal. We have been investing heavily on the EV front and we have a plan to introduce an EV, this fiscal.”

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