The health measures imposed to stem the spread of the coronavirus have crippled many businesses. The automotive sector is no exception. British automotive research company JATO Dynamics notes that global automotive sales plunged 43% y-o-y in April, from the 39% dip registered the month before.
That number is expected to plunge even further in the coming months. “We expect the automotive industry to become an increasingly difficult environment to navigate,” JATO’s automotive analyst Felipe Munoz wrote recently. He also notes that sales in Asian markets like China, Japan and Korea are improving as the pandemic is under control in these territories. However, other territories like South America and India — where Covid-19 continues to rage — are still reeling from a slowdown as lockdown measures continue.
India-headquartered TVS Motor is one of those companies seeing lower production levels of its two and three-wheelers, especially since the country imposed a lockdown over three months ago. “Casual workmen and migrant workers hailing from other states may not return rapidly, posing risks across our supply chain,” the company wrote in its recent annual report. It also points to disrupted supplies of spare parts as another factor dragging production down.
Still, JATO’s Munoz believes such situations present a new opportunity: The ability to evaluate and restructure operations. TVS Motor certainly thinks so too. On April 17, the company — through its investment arm TVS Singapore — acquired assets of British motorcycle company Norton for GBP16 million ($28.2 million). “Norton is an iconic brand celebrated across this world, and we believe in the tremendous potential it has,” Sudarshan Venu, joint managing director of TVS Motor Company tells The Edge Singapore in a recent interview.
Norton is a motorcycle manufacturer founded in 1898. The company made its name for vehicles used during the Second World War by the British Army and its allies to conduct reconnaissance and dispatch duties. duties. Other famous users include Clint Eastwood and Che Guevara. But recently, the brand is renowned for their classic models and eclectic range of luxury motorcycles ranging from authentic retro classic reboots of the famous Commando to their contemporary 1200cc V4 super-bikes.
TVS’s opportunity came earlier this year when Norton went into administration. “When it went into certain difficulties, there came the opportunity for us to lend our support to scale the business and create value,” says Sudarshan. With the deal clinched, he has already been put to work on matters on capital, engineering and manufacturing. Both companies are also collaborating on upcoming motorcycles such as the Commando, Dominator and V4 RR.
This is not TVS’s first involvement with an iconic brand. Back in 2013, the company — through TVS Singapore — signed a long-term cooperation agreement to co-create a series of motorcycles with BMW. “We have a very special relationship with BMW, we have some successful products through the joint platform in both the TVS and BMW brands which are doing very well,” says Sudarshan. He stresses that this does not conflict with his latest deal with Norton as they cater to different groups of customers, with different tastes and preferences.
The common thread between both deals is that they were performed through the company’s investment arm in Singapore. Set up in February 2003, this subsidiary acts as “a very important base” for the company.
The city state was chosen as the headquarters for this company, thanks to its favourable economic environment, talented workforce and connectivity to the rest of the world, explains Sudarshan. To date, TVS Singapore has invested $129 million, with a substantial amount of the funds going into Norton. $76 million was invested in the set up of a production plant in Indonesia, while $28 million went towards the acquisition of Norton. Another $25 million was channelled towards digital start-ups.
Building capabilities
Despite TVS’s specialisation in motor vehicles, Sudarshan has taken a liking for digital start-ups as they are “the next big thing”. To him, working alongside companies dabbling in fintech and technology pertaining to automobiles, enhance TVS’s capabilities, efficiency and the quality of its two and three-wheelers.
Its most recent investment was on Aug 19, 2019, when it pledged US$3.2 million ($4.42 million) to Predictronics Corporation based in the US state of Ohio. The company taps on concepts such as Industrial Internet of Things (IIoT), industrial artificial intelligence, big data, machine learning and predictive analytics to remove uncertainties from industrial operations and improve production planning, maintenance and product quality. The company prides itself on reducing costs, preventing downtime and eliminating wastage, without compromising on quality.
Another of TVS’s pet companies is Scienaptic System, in which it pumped in US$7 million on July 26, 2019. The New York City-based company melds big data technologies, machine learning and artificial intelligence to create solutions that: Improve risk and credit assessment, monitor evolving fraud patterns and improve customer experience.
Sudarshan is now scouting for more such start-ups to invest in. His main criteria when assessing the investment worthiness of a company is: Whether it makes a difference to the market. “It is very important that the start-up comes up with digital solutions that can improve processes and enhance customer satisfaction,” he explains.
While he is not restricting himself to a particular geography, Sudarshan has his eyes set on Singapore-headquartered start-ups. This is, as he deems the republic as an important base and appreciates the stringent standards it holds companies to.
Global domination
One of India’s oldest companies, TVS Motor was set up in Chennai by Sudarshan’s great grandfather a century ago. Since then, aside from spreading its tentacles through its investments, TVS’s two and three wheeler motorcycles have a presence in over 60 countries.
The company’s factories which assemble parts of the motorcycles spread from Nigeria and Kenya to Sri Lanka and Bangladesh, which are closer to its home base. Meanwhile, it has dealerships in the Philippines and Myanmar. The company is now looking to expand further — particularly into more Asean territories — to avail its motorcycles to a wider demographic. For starters, it is exploring the possibility of a dealership in Singapore, since it already has a presence here.
In its recent FY2020/2021 ended March 31, the Bombay and (Indian) National Stock Exchange-listed company reported consolidated earnings of INR517.3 crores ($98 million), down from the INR 711.1 crores it logged a year ago. This primarily comes from a 9.7% dip in revenue to INR 16468 crores that followed the reduced sales from the start of the lockdown in India. Even so, the company reported increases in the sales of its two wheeler exports and three wheelers by 9% and 11% year-on-year, respectively.
With cash and cash equivalents of INR414.30 crores as at March 31, up 9.5 times from FY2019/2020, Sudarshan believes the company is in good stead to carry through its expansion plans in the pipeline.
For now, the company is focused on tiding the Covid-19 pandemic through short-term cost cutting measures and the postponement of capital expenditure. But, Sudarshan takes solace in knowing that there will still be a fundamental demand for personal mobility vehicles such as TVS’s two and three wheelers given its affordability and the comfort it provides.
“We believe this story is what will remain intact in the coming months once the pandemic improves,” he says. Till then, Sudarshan says he is “hopeful of a recovery sooner, rather than later”.
