TVS Motor looks to gain speed in performance bike market despite Covid-19

For TVS, the premium push picked up speed in April this year when it acquired Norton for Rs 153.12 crore
In 1982, TVS Motor began its journey on the road to becoming a premium two-wheeler company by launching a racing team. But it gained momentum only in 2005 with the 150 cc performance bike TVS Apache. Since then, it has steadily accelerated this premium drive with the recently-acquired British legacy brand Norton and a high-end 200 cc brand called Zeppelin on the launch pad. The pandemic-induced downturn will not change this strategy, the company says.

“Premiumisation,” to use marketing jargon, has been a buzzword at TVS over the past decade against the backdrop of rising disposable incomes. Premium bikes, which refer to those that cost upwards of Rs 80,000, now account for 25 per cent of the market, up from 14 per cent seven years ago. Though incomes have taken a hit following the outbreak of the Covid-19 pandemic, most marketers expect this to be a blip. In fact, demand for mobiles, white goods and automobiles (except commercial vehicles) is already seeing an uptick.

For TVS, the premium push picked up speed in April this year when it acquired Norton for ^16 million (Rs 153.12 crore). The iconic British sporting motorcycle brand is expected to give the firm a big presence in the super-premium category and the classic racing buyer segment. Norton is a 102-year brand with a rich legacy and a dedicated customer base in many countries. Its target segment is 850-1,200 cc, much more powerful than anything that exists in the Indian market today.

“The Norton acquisition is in line with our effort to cater to the aspirations of discerning motorcycle customers. The immediate focus will be on the 21 developed markets in which Norton is already present, after which TVS will look to expand to some key developing markets such as India,” said Sudarshan Venu, joint managing director, TVS Motor.

This acquisition is expected to help TVS take on competition from Royal Enfield, UK’s Triumph Motorcycles (which has tied up with Bajaj Auto), Mahindra & Mahindra Ltd, which acquired the hardy Czech brand Jawa, and Harley-Davidson.

 

Recently, addressing TVS shareholders, Venu Srinivasan, chairman and managing director, TVS Motor, explained that “Norton enhances TVS Motors’ global portfolio, bringing complementary product segments, markets and capabilities in the super-premium category”.

“Going forward, we do look at ‘premiumisation’ as one of the ways of improving our profit margins, both in domestic and international markets,” he added. By the end of this year, the company expects to launch the Zeppelin, priced around Rs 1.25 lakh.

On September 2, TVS invested Rs 30 crore in Ultraviolette Automotive, a start-up that is developing electric mobility solutions. The start-up is building India’s first high-performance electric motorcycle — the F77 — and is now gearing up towards launching the motorcycle in the market. The company claims that this will outperform traditional motorcycles in the 200-250cc segment.

All these offerings will add to the portfolio of performance bikes that TVS has launched in the past five years. These ranged from 160 to 310cc under the Apache (Rs 98,050 to Rs 2.45 lakh), Ntorq (Rs 66,885-73,365) and iQube (Rs 1.15 lakh) brands. The TVS Apache series and TVS Ntorq 125 together account for 30 per cent of TVS Motor’s volumes.

The TVS Apache series — TVS’ most reliable racehorse — has a market share of roughly 23 per cent in the premium motorcycle category, with over 3.5 million customers, according to a company spokesperson. TVS Apache RR 310 (Rs 244,799) is based on a BMW platform and the company claims it is one of its most successful products in domestic as well as export markets. Brand expert and founder of Mogae Group Sandeep Goyal said the Apache has shown that consumers are willing to upgrade to bikes with more bells and whistles when they trust a brand, since two-wheelers is a category propelled not just by utility but aspirations too. “I think the BMW-Motorrad tie-up gave them a psychological boost versus the Japanese brands,” he said. (Motorrad is the German automaker’s motorcycle brand). 

Analysts agree with this view, and add that TVS has been the only player, other than Royal Enfield, that launched products in the premium segment.

“These (premium) products are also improving the company’s margins and would gradually help it bridge the gap with its peers. Five years ago, the margin difference between TVS and its peers was 9-10 per cent in general, and today it is 6-8 per cent,” said Basudeb Banerjee, research analyst at Ambit Capital. The gap is expected to close to 4-6 per cent in the next two or three years, he added.

As Banerjee pointed out, other than Royal Enfield and to some extent Bajaj, there was no real third player in India. TVS is now filling the spot and is in a better position to capitalise on the trend with its new offerings. The company has also understood that if it focuses only on the mass market, it may underperform, and that scale is also a challenge.


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