India’s leading two-wheeler maker TVS Motor Company became the first firm to set up a manufacturing base abroad. The new factory set up in an industrial estate in Indonesia was inaugurated by the highest dignitary who is none other than Indonesian President. The move marks a new era for Indian two-wheeler industry, which began making motorcycles by borrowing Japanese technology in late ’80s.
The new company, PT TVS Motor Company, will make step-thru motor cycles, popularly called ‘bebeck’ in Southeast Asia.
Unlike India, where youth prefer high-powered bikes, ‘bebecks’ are sought after by young men and women in the region and are even used to carry goods like poultry.
The integrated factory, set up on 20 hectares, will house an engine and vehicle assembling unit and a paint and testing track, apart from a R&D centre and mosque, as Islam is the dominant religion in Indonesia. TVS has brought in $50 million investment in the first phase and plans to put in an equal amount in the next five years. The plant has an installed capacity of 300,000 units per annum.
It is ironic that a move to set up a manufacturing unit in a new market should come from TVS. In the last several months, the company has lost ground to competition in the premium category of bikes for lack of a product to combat rival Bajaj Auto’s hot seller Pulsar. The TVS stock has also lost ground as slowdown prompted by higher interest rates hit all two-wheeler makers.
TVS Motor started from a blank sheet of paper and designed their model, Neo, after studying the market for two years.
This is a strategic long-term move of TVS to globalize their operations. According to the top TVS technical experts the move to Indonesia is already teaching them a few lessons in manufacturing.
In the years to come, it is expected Indonesia will become the base for TVS strategic objective of making bikes for the Asean region. Markets in the region are dominated by Japanese and Chinese players and together they sell 10 million two wheelers a year. Indonesia alone accounts for half the number. Since these markets also prefer using vehicles with similar engine capacity (between 100-150cc), company officials feel that their research and development costs will be spread across larger volumes.
Neo, launched in Indonesia will come in four models and will be priced at Rupiah 40 million, just as much as the Japanese bikes but more expensive than the Chinese models. TVS officials defend their pricing strategy saying that their model offers more features than Japanese bikes.
PT TVS Motors chairman has clarified their strategy on pricing outlining that they didn’t want to start off as a cheap alternative, a positioning that Chinese companies have done. TVS want to be known for technology and quality. Moreover now-a-days Chinese quality is not up to the mark and customers are getting dissatisfied all over the world.