TVS Motor mulls plans to set up a greenfield plant in China

India’s third largest two wheeler company TVS Motor Company is mulling plans to set up a greenfield plant in China, though the company’s Chairman and Managing Director Venu Srinivasan said that it will not happen in the near future.

“While some of the automobile companies in India have been expanding their product ranges into new segments in the automobile industry our strategy (for growth) would be to expand geographically,” Srinivasan told select reporters at a dinner meeting in Chennai on Tuesday.

Srinivasan’s comments comes at a time when Hero Group, a joint venture partner in India largest two wheeler company Hero Honda had recently tied up with Daimler AG of Germany to set up a truck manufacturing facility in Chennai, while TVS Motors’ archrival Bajaj Auto has ambitions to manufacture ultra low cost cars with Renault-Nissan Alliance. Another recent development indicating a similar trend was when Mahindra & Mahindra, which has so far restricted its interest to commercial and utility vehicles and passenger cars, had recently evinced interest in picking up majority stake (76 per cent) in Pune-based two wheeler company Kinetic Motors.

One of the challenges TVS Motor is likely to face is the regulatory compulsion in China to set up a joint venture with a local partner there rather than go alone. Chinese regulation makes it mandatory for foreign investors to have a local partner to avail of fiscal incentives. On the other hand TVS Motors’ history in joint venture arrangements has not been smooth. In 2001, TVS Motor had broken its ties with Suzuki Motor Corporation after a bitter spat with the Japanese company.  However TVS Motor had since then managed to emerge as the third largest two wheeler company, leaving Suzuki to restart its India operations only recently and that too with limited success.

In July 2007, TVS Motor had rolled out its first two-wheeler (TVS Neo) from the new plant in Indonesia with an investment of $50 million, which expected to be doubled over the next three years.

Discussing his company’s plans for the domestic two wheeler market, he said that TVS Motor hopes to improve its market share to 16 per cent in the second quarter and possibly end the year in March 2009 with 18 per cent marketshare.

TVS Motor Company has reported a minor slip in net profit to Rs 7.02 crore in the first quarter of this year against Rs 7.55 crore net profit reported in the first quarter of 2007-08. The slip in profit has been attributed to rising input costs, despite total revenue increasing by 15 per cent to Rs 924 crore during the quarter.