TVS Motor sales may decline as high court rules against Flame

TVS Motor sales may decline as high court rules against Flame
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First Published: Mon, Feb 18 2008. 01 00 AM IST
Updated: Mon, Feb 18 2008. 01 00 AM IST
India’s third biggest bike maker, TVS Motor Co. Ltd, which is already reeling from declining sales and profit, may receive a further setback after a weekend order from the Madras high court barred the sale and manufacture of its Flame motorbike.
TVS, which was banking on the Flame to boost sales in a tepid market, has been locked in a legal tussle over the technology used in the bike that larger rival Bajaj Auto Ltd claims to have patented.
Sales have already fallen throughout this fiscal year and TVS needs to increase sales and reverse dipping profits for at least three straight quarters.
“It’s going to be a big hit for TVS as their domestic marketshare has come down in recent times,” said S. Ramnath, vice-president at SSKI Securities Ltd. “Flame was the comeback vehicle for them.”
In the first 11 months of this fiscal year, motorcycle sales of TVS in the domestic market were down 41.5% to 417,837 units. Consequently, its market share in this category has dipped to 8.6% in this period from almost 13% a year ago.
In the quarter ended December, TVS’ net profit halved. What has compounded TVS’ problems—and indeed that of all other manufacturers—are interest rates that are at a five-year high and lenders reluctant to loan money to finance two-wheeler purchases.
Bajaj, which is India’s second largest seller of bikes, has introduced a bike called XCD that competes for the same customer as the Flame. One in every two motorcycles sold in India belongs to this category known as the executive segment, which is one notch above entry-level bikes.
“This is an important segment for any manufacturer as it is the largest segment and also the best in terms of margins,” said Ashutosh Goel, an analyst at Edelweiss Capital.
The dispute between Bajaj and TVS relates to a technology called digital twin spark ignition (DTSi), which has two igniters instead of one for better fuel efficiency. Bajaj claims to have patented this and says that TVS may have infringed this technology. Bajaj uses the DTSi engine technology in four of its models—Pulsar, Avenger, XCD and Discover.
TVS claims its technology uses three valves instead of the two used in DTSi and introduced the Flame late last year. It has also filed two more suits against Bajaj in the Bombay high court to claim damages for defamation and another for revocation of Bajaj’s patent in the Intellectual Property Appellate Board, a quasi-judicial body.
In an interim order pronounced on Saturday, a judge of the Madras high court upheld Bajaj Auto’s petition to restrain TVS from booking orders on the motorcycle.
This overrules an earlier 20 December verdict of the same court which allowed TVS to take orders on the 125cc model. The court also dismissed a petition filed by TVS under section 106 of the Patent Act, which deals with the power of the court to grant relief in “cases of groundless threat of infringement proceedings.”
A TVS spokesperson said the company would appeal against the latest verdict.
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First Published: Mon, Feb 18 2008. 01 00 AM IST