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‘We will do better than the industry in domestic and international markets’: TVS CEO, KN Radhakrishnan
India’s third largest two-wheeler company, TVS Motor Company, said its growth, both in the domestic and international markets will be better than the industry. The company is also ramping up EV capacity to meet its target of 25,000 units by March 2023. TVS Motor has earmarked an investment worth Rs 750 million in its EV business.
During the Q2 earnings call, KN Radhakrishnan, Director and CEO, TVS Motor said that market sentiment across the company’s products is very positive. “We are hopeful that the demand in the domestic two-wheeler market will continue. With our product range, premiumisation, new products and other initiatives, our growth will be better than that of the industry – in the domestic and international markets,” said Radhakrishnan.
Export markets such as Africa, South-East Asia, Indian subcontinent, Central and Latin America among others have also been affected due to external economic conditions such as the ongoing Russia-Ukraine war, currency volatility, slow consumer sentiment among others.
“These are mainly two-wheeler markets for us and that is why we are moderating exports to these countries. Shops have now started popping up,” he added.
TVS also expects improved semiconductor supply during the third and fourth quarters.
The company announced a one percent inflation in 2QFY23 both domestic and export and 1.1 percent in October 2022 in the domestic market. The increase in commodity costs had an impact of 1.5 percent in 2QFY23. However, most of the impact was offset by price revisions and mix gains. Retail sales prices have started to soften after reaching a peak and will moderate in the second half, Radhakrishnan said.
EV wave
In the electric vehicle segment, Radhakrishnan said, iQube is growing well, with around 8,000 units registered by October 2022 (2QFY23 – 16,000 units).
The company expects to produce 10,000 units of the iQube by November 2022 and is targeting 25,000 units by March 2023.
In the future plans of the company, TVS Motor Company has listed a range of new products to complete the category and cater to different segments. “We have planned around Rs 750 crore Capex in 2022-23, mainly towards EVs. EV is an important strategy and in 12 quarters we will look at the complete product pipeline,” he said. Out of a total budget of Rs 750 crore, the company has already invested Rs 320 crore.
In response to a question about whether the company will look at the EV business as a separate investment, the executives said, “We are evaluating all options including carving out the EV as a subsidiary.”
Radhakrishnan said the company has targeted 3,500 units of the newly launched Ronin by October 2022. Currently, TVS is selling the Ronin only through select retailers.
Norton, the British motorcycle brand that was bought in April 2020 for GBP 16 million, said, “the products are being prepared this year and customers will be delivered their products.” In October, Norton Motorcycles unveiled two upgraded versions of the Commando 961 motorcycle in the UK.
Analyst’s take
On the performance of TVS Motor, Motlilal Oswal said, “We estimate the pace of TVS’s over-capacity in the domestic two-wheeler industry to slow as the gaps in the product portfolio have been largely closed. Volume growth is expected to be driven by new product launches (Raider, Ronin) in the domestic market and increased exports. We forecast TVSL’s two-wheeler volume to grow at 13.5 percent CAGR over FY22-25E.
The research firm added that TVS Motor earns about 40 percent of its total earnings before interest, tax, depreciation and amortization (EBITDA) from its domestic Scooter business, making it vulnerable to EV disruption in the listed two-wheeler space. Any value gained in the EV subsidiary can act as a catalyst for rebalancing.
Report card
TVS Motor’s revenue grew nearly 47 percent to Rs 407.5 million for the quarter ended September 2022 compared to Rs. 277.6 million for the quarter ended September 2021. Operating income grew by 28 percent to Rs 7,219 million for the quarter ended September 2022 compared to Rs 5,619 million for the quarter ended September 2021.
The Company’s operating EBITDA grew by 31 percent to Rs 737 crore for SQFY23 as against EBITDA of Rs 563 crore for SQFY22. The Company’s EBITDA margin for the quarter stood at 10.2 percent compared to an EBITDA margin of 10 percent reported in SQFY22.
TVS Motor said that high investment is being made in all key features and better availability of vehicles with the launch of TVS Ronin and the new TVS iQube Electric. As part of the EV strategy, special resources are added in the areas of software, electronics and digital and analytics to further enhance the team.
Although premium motorcycle sales improved over Q1, the full demand could not be met due to the continued shortage of semiconductors during Q2. However, there was a month-on-month improvement in motorcycle sales in Q2 and supply constraints are expected to ease further in Q3.
The company’s total two-wheeler and three-wheeler sales, including exports, grew by 12 percent registering 10.27 lakh units in the quarter ended September 2022 as compared to 9.17 lakh units registered in the quarter ended September 2021. lakh units in the quarter ended September 2022 against 4.39 lakh units in the quarter ended September 2021.
Scooter sales for the quarter ended September 2022 grew by 44 percent registering 3.83 lakh units against sales of 2.66 lakh units in SQFY22. The company recorded two-wheeler exports of 2.52 lakh units in the quarter ended September 2022 against 2.70 lakh units in the quarter ended September 2021. units in the second quarter.
According to FADA data, TVS Motor’s market share in October grew marginally to 15.89 percent from 15.50 percent in October 2021.
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