TVS assemblies for 2W power supply; improves the margin against peers | Tech Reddy


TVS Motor Co. Ltd is growing rapidly in the electric vehicle (EV) segment, topping the list of incumbents. According to Vahan registrations, the automaker’s electric two-wheeler (e-2W), the Qube, has closed registrations of more than 3,600 units in August so far, making it the third-highest company in the e-2W segment and 14% market share.

Yes, new entrants are leading the race but TVS is slowly closing the gap. In perspective, TVS’ 2W market share in June stood at 5%.

Moreover, its continuous efforts to improve the margin have paid off. TVS has operated at very low margins compared to peers over the past decade, as it had a weak presence across all 2W sub-segments, said analysts at Jefferies India.

“Ebitda margin for TVS is only 6.4% in FY10-17 compared to 15%/20% for Hero MotoCorp Ltd/Bajaj Auto Ltd; its average Ebitda/car at Rs2, 300 was 60%/77% less than Hero/Bajaj,” said Jefferies analysts in a report on August 18. Ebitda is short of earnings before interest, tax, depreciation of value and reduction of money.

“Its Ebitda margin has increased to 10% in the last four quarters against Hero/Bajaj’s 12%/16%; Its Ebitda/car increased to Rs6,400 – just 10% less than Hero and now 49% less than Bajaj,” added the report.

The company has also gained market share in various sub-segments over the years. According to the Center for Economic Research of India, in the scooters and 125cc+ bikes segment, TVS’s market share was 15% and 11% in FY17, respectively. This increased to 21% and 18% in FY22, respectively.

Of course, TVS’s internal combustion engine (ICE) scooter portfolio is vulnerable to the increased penetration of EVs as this segment accounted for nearly 37% of its total volumes in July. But the rise of EV volumes can help to remedy this. “We see the potential for the stock to increase if TVS is able to capture the same market share in EVs as in ICEs,” added the Jefferies report.

The company’s shares have gained 56.5% in the calendar year 2022 so far vis-a-vis 25% and 17% appreciation in Bajaj Auto and Hero MotoCorp shares, respectively.

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