TVS vows to roll-out zero-defect two wheelers & improve margins

Tags: Companies
TVS Motor Company, which is attempting a new growth path since the launch of a 125 cc bike in September 2012, said it has been working towards rolling out zero-defect products benchmarked to Honda vehicles.

The fourth largest domestic two wheeler firm has planned to launch at least five new models till the end of 2014 and seeks to improve EBITDA margin levels to eight per cent from 6.5 per cent in the next three years.

At the launch of 125 cc bike Phoenix, the company said it would launch a new product every quarter and had planned to launch five new models by the end of calendar year 2013. The company has now said it would launch two scooters and one bike during the current fiscal.

“We have very serious actions in place. There have been certain delays because we have been improving the quality very consistently last three years. The entire effort of management was to make the quality Number One. We have learnt significant engineering, processes and knowledge from BMW in the last one year of working with them. This has delayed the implementation of some of our products as we wanted to incorporate the learning from BMW to make the products better,” Venu Srinivasan, chairman and managing director of TVS Motor told the shareholders at the 21st Annual general meeting of the company.

“Our new product Phoenix, 125cc bike, is a zero-defect product. Our scooter Wego had one defect and that has been fixed. So it is a defect-free vehicle. Everything is focused towards zero-defect products – benchmarked to Honda,” he added.

Interestingly, TVS Wego has seen about seven per cent rise in volumes at about 43,000 units during the first quarter, when the overall scooter volumes in the country grew by 14 per cent.

Srinivasan said the company would exhibit significant improvements not only in current year, but over the next three years. “TVS Motor will do better next year in spite of recession. From now to 2014, we have planned to launch six products, including a three wheeler,” he added.

The company said its profitability is as not as high it should be due to significant investments made in technology like 4-stoke platform and product development. “We have to make products on par with a brand like Honda. Hence, some of our costs are higher. However, over the next 3-4 years, we will see our profitability going up as we set out a target to improve our EBITDA margins to eight per cent from 6.5 per cent,” he added.

The company’s capex for the current fiscal is estimated at between Rs 150 crore and Rs 175 crore when compared with Rs 100-110 crore spent in previous fiscal. This year’s capex is higher due to proposed investments for company’s venture with BMW Motorrad.

During this fiscal, TVS plans to launch an all new scooter, a variant of Scooty and a bike, which is expected to be positioned in the executive segment, where TVS had no presence till the launch of Phoenix in September last year. The three brands Bajaj, Hero and Honda have strong presence in the executive segment of the motorcycles.

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