TVS plans to focus on “clever niches”

TVS Motor Company plans to focus on “clever niches” and avoid taking on its two bigger rivals Hero Honda and Bajaj to grow its two-wheeler business. The approach will drive TVS’ product development, marketing positioning and export expansion, says TVS chairman and MD Venu Srinivasan.He is very clear that the only way forward is to avoid being a ‘me-too’ in the market. “Being a smaller company, we need to be more focused and nimble. We will concentrate on carefully designed products that target niche segments, and will expand geographically,” he says.

In keeping with this strategy, TVS launched Jive, the urban bike with an auto clutch and the unisex metal-bodied scooter Wego in the previous fiscal, as against commuter bikes and sporty motorcycles that the top two players specialise in. In launching the unisex scooter, for instance, TVS was veering from the Hero Honda positioning of the vehicle for women.TVS’ top management believes it can only survive through gradual growth in a market dominated by two big-muscle rivals.

As the third biggest player in a market that crossed the 10 million unit level in March, TVS’ 1.5 million units-a-year share isn’t big enough to take on market leader Hero Honda’s 4.6 million tally in FY09-10 or Bajaj Auto’s 2.5 million units in the same period.Both Bajaj and Hero Honda are stepping on the gas in terms of sales targets in the new fiscal. Bajaj has already announced it plans to sell 4 million two and three-wheelers in the new financial year while Hero Honda is planning a new greenfield factory because its Gurgaon, Dharuhera and Haridwar plants are already working to capacity.

Bajaj Auto MD Rajiv Bajaj calls the two biggest consumer segments in India’s motorcycle market Ram and Krishna. “Ram is the good guy who buys a bike for functional reasons while Krishna is the naughty guy who wants some fun with his bike,” he said. “Between the two, they command the lion’s share of the bike market in India.”TVS’ mantra is to set less ambitious targets but grow consistently and with enough geographical spread to derisk its business. It plans to sell 2 million two-wheelers in the new fisc and will spend around Rs 200 crore in adding capacity at its factory in Hosur, Karnataka.

The new focus does not, however, mean TVS will not aim for the juicier slice of the market, namely three-wheelers. It entered the business couple of years ago and from around 600 units in March 2008, sold 2,600 in April 2010. The company aims to take the figure up to 3,500 units a month.While Bajaj tops the three-wheeler market with 30,000 units sales a month, TVS plans to sell around 40,000 units in the whole of the current financial year. In 2011-12, the target is to sell around 60,000 three-wheelers and 2.4 million two-wheelers.

Auto analysts say the two-wheeler market is growing nicely enough for all three to survive and grow, with the bike market expected to clock around 12 million units in the new financial year. “The two-wheeler market should clock around a million units a month including exports of which bikes alone will be at 800,000 to 900,000 units,” said Mr Bajaj.Given that, experts see TVS’ niche-and-grow strategy as viable. “The two-wheeler segment in India is at a mature level with a strong distribution network and penetration across the country,” says Raghu Venkatnarayan, executive director, auto practice, Ernst & Young.

TVS is a significant third player in this market and for it to strengthen its position from here on, it should focus on developing products that will take a particular category to the next level and create new benchmarks, he adds. “Differentiation will be the key factor for TVS to grow in this market.”Auto analysts, however, are divided on the positioning strategy that best serves the third player in any market. An analyst with a Delhi-based multinational consultancy quoted from the Al Ries and Jack Trout work, 22 Immutable Laws of Marketing, which he said holds good for all products: in the long run, every market becomes a two-horse race.
Others say each company is different and TVS has managed its fortunes well since it went into the motorcycle business with Suzuki in the 1980s. An analyst with a Mumbai-based broking firm points out that TVS clocked over 20% growth in the first three months of 2010, in line with the kind of growth Hero Honda (23.6%) and Bajaj (30%) clocked in FY09-10.

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Source: ET 16-4-2010

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