Venu Srinivasan, CMD of TVS Motor, believes that margin pressures will continue due to raw material costs. He further states that the company hopes to maintain gross margins in FY07.
Srinivasan also informs that the company aims to launch three bikes in 2007. Srinivasan further states that across their product range, the company has demonstrated significantly superior quality and value, which is the main driver for its growth.
Excerpts of CNBC-TV18's exclusive interview with Venu Srinivasan:
We have seen a phenomenal growth in TVS Motor in August especially and your marketing head said that you will be achieving 1.7 lakh units, do you think that the worst for TVS is coming to an end?
We have been through a trough because of the Victor; and Centra, which didn't take off as expected because the pricing was higher than what the market could bear.
We had to go back to the drawing board on products but I think the most significant thing that we have done in the last three years has been on quality. Ever since, there has been huge quality programmes in the company and the result of that can be seen in two-three awards that we got this year. Scooty got the 'Scooter of the Year', Apache won 'Bike of the Year'.
Overdrive rated us as the 'Best Quality Motorcycle Company', Star has got the lowest defect rate for any motorcycle. Apache has got the highest customer satisfaction rating. So across our product range, we are demonstrating significantly superior quality and value and that is driving this growth.
We have seen sales go up. How do you see the pressure on margins coming in?
Margin pressures will continue because I don't see raw material or energy prices abating significantly. There may not be a significant increase further, but what levels have been reached, will be sustained. Therefore, our target would be to maintain gross margins as last year.
Apache has been a runaway success for you. Which are the other launches that we can see from you coming up in this fiscal?
I don't like to talk about launches in public domain. But clearly, there will be some variants of current bikes coming out later this year. There will 3 new bikes launched in the next financial year; plus our three-wheelers and two bikes in Indonesia. So we actually have our hands full at this point.
What about your capacity expansion? Are you looking at that at this moment?
We are putting up an assembly plant in Himachal, which will have a capacity of 300,000 bikes. This will take our total capacity hopefully to about 2.5 million and 300,000 in Indonesia as well.
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