Inside TVS Motor’s global ambitions

Far away from Africa, on the streets of developed economies such as the US, Europe and Japan, the BMW G310, BMW G310GS and BMW G310RR have been receiving rave reviews for their build, performance and quality. These bikes are manufactured by TVS at its facility in Hosur, Tamil Nadu, as part of the company’s partnership with BMW Motorrad, signed in 2013. The Indian company has so far manufactured over 100,000 bikes for the German giant.

Once a humble India-focused moped and two-wheeler maker, TVS today straddles the world with its mobility solutions, and its tentacles extend into economies rich and poor. This ability to understand and solve customer needs in markets across the world and deliver products that satisfy demanding customers has emboldened Sudarshan Venu, the company’s managing director, to chart a bold new path for TVS. He wants to transform TVS, a pure play product company manufacturing two-wheelers and three-wheelers, into a global mobility service provider, rubbing shoulders with the top global automotive brands by 2030. It’s all part of his ‘Vision 2030’.

“We are in a disruptive world. The automotive sector has not seen such changes before and this throws up a lot of exciting new opportunities. We are keen on tapping them," says the 34-year-old Sudarshan.

But, can the company, which is just emerging from decades of product-related challenges, pull off such an audacious gamble on a global scale? Developed markets, for instance, are virgin territory for TVS —the company has so far focussed on low- and middle-income countries. In addition, this strategic shift will involve handling new product lines, tackling varied customer profiles and needs, acquisitions and partnership, getting employees from disparate cultures to work together, and developing a management cadre to take on all the complexities that come with these global ambitions. To say it would be challenging would be an understatement.

“To successfully globalize, Indian companies must excel in both differentiation and low cost, which … is extremely difficult to achieve," says Vijay Govindarajan, innovation guru and Coxe distinguished professor at Dartmouth College’s Tuck School of Business.

The groundwork

To be sure, TVS has laid a bit of a foundation to achieve its global dreams, establishing a stronger position in India and aggressively acquiring assets overseas. Today, the company is the third-largest two-wheeler manufacturer in India after Hero MotoCorp Ltd and Honda Motorcycle & Scooter India Pvt Ltd, with a market share of 16%, revenue of ₹20,791 crore and a profit of ₹894 crore in 2021-22. Exports accounted for 40% of that revenue, with one in four bikes exported from India being a TVS product.

“We are the first two-wheeler company in the world to win the Deming Prize for quality. We have developed strong products, not just for India, but for markets across 80 countries," says KN Radhakrishnan, director & CEO, TVS Motor. The company also has a full-fledged manufacturing facility in Indonesia and assembly units in Bangladesh, Kenya, Colombia and Turkey.

In April 2020, TVS acquired Norton, the iconic British motorcycle brand, for ₹153 crore. It marked the company’s entry into the competitive UK market. In September 2021, TVS surprised everyone by taking an 80% stake in EGO Movement, a Swiss technology company offering innovative mobility solutions, for $17.9 million. The company makes e-bikes and has a presence in Switzerland, Liechtenstein and Germany.

Four months later, it acquired a 75% stake in Swiss E-Mobility Group, another e-bike manufacturer and retailer, for $100 million. “TVS is now the largest seller of e-bikes in Switzerland and it plans to take these products to other parts of Europe. e-bikes are fast becoming the favoured mode of personal mobility here and we saw an early shift," explains Sharad Mohan Mishra, president, group strategy, TVS. That apart, the company has invested over $90 million in various startups that are working among others, in the fields of Industry 4.0, risk modelling, internet of things (IoT) and electric vehicle (EV) space.

“We are embracing opportunities in line with the way the world is going," says Sudarshan when asked about this newfound aggression. “We need to move even faster," he adds. While he credits his father, Venu Srinivasan, for the strong foundation that has been laid, it is his other mentor, Ralf Speth, former head of Jaguar Land Rover and currently the chairman of TVS, who has been pushing him to go global, embrace cutting-edge technology, and stay ahead of the curve. “TVS is already on this path," says Speth.

Missteps galore

But going global always comes with its own set of challenges, with timing a critical factor. Is the company scaling up at the right time? The senior Srinivasan had preferred a cautious approach, making sure things were solid on the home front first. But has the company fortified its domestic market enough? Today, it may have mopeds, scooters, commuter bikes, premium models and luxury offerings that are well accepted, as evident from its rising market share, but that was not the case just a few years ago.

TVS Motor’s product problems began in the early 1990s, when Indian consumers shifted to the more fuel-efficient four-stroke engine technology. At that time, the company had a joint venture with Suzuki Motor Corporation. The Japanese partner did not have good four-stroke technology and delayed investing in its development. Fiero, a four-stroke motorcycle, came four years late and failed. Existing two-stroke technology products such as Shogun and Shaolin had to be phased out due to new emission norms. The lack of good products frayed the relationship and it finally led to a break-up with Suzuki in September 2001.

TVS began developing its own products but the learning curve was steep and hard. The first product, TVS Spectra, a four-stroke scooter, failed as it had too much plastic. The company launched Centra, Wego and Jive but they sank without a trace. The TVS Victor showed some promise when it was launched in 2001 but reliability issues killed it.

As the market moved to premium 125cc bikes, the company struggled to offer a strong product. TVS Flame was launched in 2008 only to be discontinued in 2012. It was replaced by TVS Phoenix, but poor sales meant that it was not upgraded to meet Euro IV emission norms. “The early 1990 to late 2010s were a nightmarish time for TVS Motor. The company struggled to get its products right. After its divorce with Suzuki, its R&D department was stretched and took its time to deliver," says an analyst with a leading mutual fund.

TVS’s global ambitions also come at a time when its domestic market is just emerging from an unprecedented slowdown and exports are sluggish. Between 2018=19 and 2021-22, sales (in volume terms) plunged 36%. Its 2021-22 sales sank to 2011-12 levels, estimates Ambit Capital, a research firm. The rise in the cost of two-wheelers due to the BS-6 shift, increase in input costs, weak demand due to covid, sluggish recovery post that and the global chip shortage contributed to the slowdown. However, 2022-23 is showing a recovery though not a uniform one. Urban demand for premium bikes and scooters is good but that is not the case with entry-level bikes and rural demand—a fallout of the so-called K-shaped recovery.

According to Ambit Capital, TVS, which has 50% of exposure to premium motorcycles and 40% exposure to scooters, is relatively better placed as demand for these products emanates from urban centres. Its electric vehicle, IQube, is also doing well, selling 10,000 units a month — as of February, it had racked up a 19% market share. Unlike in the case of four-stroke technology or premium bikes, TVS is a first mover with respect to EVs. “We began working on our EV a decade ago. What we have in the market is the second generation IQube with a more advanced battery set up," says Manu Saxena, senior vice president, Future Mobility, at TVS Motor. It is the only legacy player to effectively challenge the new-age EV manufacturers.

The other big challenge will be to manage the complexities that operating in multiple markets and handling customers with different profiles and needs throws up. Today, it has to meet the aspirations of the poor in Africa, the lower and upper middle class in Asia and Latin America and that of the rich in Europe. Does TVS have the management bandwidth for this? On that score, it just might.

A cadre for the world

Tucked away amid the farmlands in Hosur district’s Thattanahalli village, close to Tamil Nadu’s border with Karnataka, is the TVS Institute for Quality and Leadership (IQL). With its manicured lawns and exotic trees, the 77-acre property resembles a resort from the outside. It is, in fact, TVS’s equivalent of Crotonville, General Electric’s famous Management Development Institute.

The brainchild of Venu Srinivasan, it was set up in 2011 and is today an accredited corporate university. In the last decade or so, it has trained about 10,000 employees every year to build their talent and capabilities, taught them the Total Quality Management (TQM) way of working, aligned the company’s values and vision apart from building process capabilities to support business strategies. “Today if we have good products, highly skilled workers, a great leadership pipeline and top independent rankings in terms of quality and reliability consistently, it is thanks to IQL," says Sudarshan.

The company has also been making key hires across the world. For instance, it recently hired Bernhard Heiming, a German with vast experience in the EV space and a former JLR employee, as chief technology officer. Tim Prentice, ex-Triumph, has been roped in as vice president, design. There are many more. “We have over 1,000 expats working with us now," says R Anandakrishnan, group head – HR & IT, TVS.

Experts such as Marshall Goldsmith, an executive leadership coach, have often warned companies scaling up globally to remind themselves about “what got us here but won’t get us there" and the need to reorganize their management structure to facilitate growth. TVS recently restructured its management from being strictly functional to clear-cut verticals. “Responsibilities are clearly fixed and we have given complete freedom to the management team," says Sudarshan.

TVS, meanwhile, is avoiding the classic mistake that companies make while scaling up: doing everything on their own. The company has widened its partnership with BMW Motorrad and is now well into product co-creation. It has tied up with top universities such as University of Warwick to access knowledge in cutting edge areas. In India, it has partnerships with Amazon, Swiggy and Rapido to offer last-mile solutions. For charging infrastructure, it has tied up with Jio-BP and Tata Power Company Ltd. It is also ramping up its captive financing arm TVS Credit Services Ltd.

While professor Govindarajan is confident that TVS’s product differentiation as well as cost advantage will help, he has some advice for Sudarshan: choose countries carefully; opt for the right mode of entry (a strategic alliance, acquisition or greenfield); build local capabilities. Also, any business leader who is taking a company global must know ‘how fast is too fast’. If not, then talent acquisition, the leadership pipeline and cultural congruence won’t keep pace. Such a scenario will inevitably lead to suboptimal outcomes or even hurt the company’s future prospects.