Bajaj Auto, TVS may open plants in Asia, Latin America
Bajaj Auto, TVS may open plants in Asia, Latin America
Bloomberg, Mumbai, India
Bajaj Auto Ltd. and TVS Motor Co., India's second- and third- biggest motorcycle makers, may open factories in Latin America and Southeast Asia, where they say customers demand a similar type of product as at home.
TVS Motor is studying the possibility of setting up a plant in Thailand, Indonesia or Vietnam, said Chairman and Managing Director Venu Srinivasan in an interview. Indonesia is the world's third-biggest market for two-wheelers after China and India.
The Indian producers, which compete at home with Honda Motor Co. and Yamaha Motor Co., the world's biggest motorbike makers, aim to extend their overseas sales network. Being less dependent on India is part of their strategy to raise sales and profit.
"A regional diversification is the right strategy to adopt for Indian companies," said Hideo Ueki, who oversees US$6 billion in Japanese equities as chief investment officer at UBS Global Asset Management (Japan) Ltd.
Bajaj Auto is "open to the idea" of setting up factories in countries such as Brazil and Indonesia as part of its "ambition to become a regional player in the next five to eight years," Sanjiv Bajaj, vice president in charge of finance, said in an interview. "It would become very difficult to address markets like Indonesia by sitting here (in India)."
Bajaj Auto already sells three-wheeled vehicles overseas, for example in Brazil, Indonesia, Bangladesh and Sri Lanka. It boosted its exports in the year ended March 31 by 148 percent to 45,810 motorcycles, accounting for 5 percent of the total.
Bajaj Auto is developing a new motorcycle with Kawasaki Heavy Industries Ltd., Japan's second-biggest heavy machinery maker, for sale in India in July. The same product will also be for export. The company also said its Pulsar motorcycle, which it developed on its own two years ago and is sold in India, could be sold in other emerging markets.
"With only very minor tweaks in our existing lineup, we will be able to offer exactly the right products these markets want," Bajaj said.
Having a plant overseas would also allow Bajaj Auto to benefit from lower regional duties, said Bajaj. Duties within Southeast Asia will fall to 5 percent or less under an Association of Southeast Asian Nations agreement and there are similar treaties in Latin America, he said.
TVS's motorcycle exports rose 161 percent in the year ended March 31 to 7,570 units. Still, they accounted for only 1 percent of its total motorcycle sales. India accounted for the rest.
"A diversification to more countries offers better returns than diversification of more products in one market," TVS's Srinivasan said.
TVS may link up with a local partner in Southeast Asia, said Srinivasan. The company will decide on its overseas expansion plan by the end of the year.
TVS Motor has been developing its own vehicles, such as the 110cc Victor motorcycle and Scooty scooter. The company expects to sell these products in Southeast Asia and other emerging markets.
The Victor in India competes against the Splendor from Hero Honda Motors Ltd., 26 percent owned by Honda Motor, and the Caliber made by Bajaj Auto with technology provided by Kawasaki.
Since they have the products and they are cost competitive, an overseas expansion is the best thing to do to bring down their dependence on India," said N.K. Garg, who helps manage the equivalent of $2.6 billion of bonds and stocks, including TVS Motor and Bajaj Auto, at Unit Trust of India.
Vehicle exports from India, including cars, trucks and motorcycles, rose 65 percent to 305,368 units in the year ended March 31, according to the Society of Indian Automobile Manufacturers, a grouping of vehicle makers.
About four-fifths of motorcycles sold worldwide are of engine capacity less than 150cc. Motorcycles with engine capacity below 125cc account for 70 percent of motorcycle sales in India, according to the grouping.