TVS & Sons eyes rural India for growth

With its core CV distributorship business down, the company is driving new service initiatives as well as streamlining services in the spare parts business, says Kiran Bajad.

By Kiran Bajad calendar 15 Apr 2014 Views icon15320 Views Share - Share to Facebook Share to Twitter Share to LinkedIn Share to Whatsapp

With its core CV distributorship business down, the company is driving new service initiatives as well as streamlining services in the spare parts business, says Kiran Bajad.

TV Sundram Iyengar & Sons’ dealership and distribution arm is working on a rural India strategy to expand its footprint and also circumvent the slowdown. To further strengthen its strong ties with customers and also enhance its service, TVS & Sons has established a CRM (customer relationship management) platform which enables it to get full visibility of customer requirements. Further, being one of India’s large commercial vehicle dealers, it has launched a fleet management service that aims to reduce the total cost of ownership of vehicles for fleet owners.
According to CEO and global president G Srinivasa Raghavan, the company, in collaboration with OEMs, aims to introduce its CRM platform by the second quarter of next fiscal in Kerala. “We are trying to introduce a cache model to penetrate the rural market with minimal investment and even if we get just 100 numbers more per month our market share goes up by 3-4 percent,” says Raghavan. “With better co-ordination with OEMs, we are expanding the brand promise by increasing our services in terms of touch points. We have introduced 24x7 services, night shifts and services on Sundays for our institutional customers,” he adds.

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 At present, the company’s plan is to introduce a cache model to penetrate  the rural market in Kerala with minimal investment. 

 

HANDLING THE SLOWDOWN
TVS & Sons’ dealership business distributes CVs, UVs, passenger cars and construction equipment from leading brands such as Ashok Leyland, Mahindra & Mahindra, Mahindra Trucks & Buses, Renault and Escorts. With more than 150 outlets that sell 60,000 vehicles a year, it provides aftersales services to over 600,000 vehicles. The company also caters to Sri Lanka and Bangladesh through its JV partners in these countries.
With the M&HCV segment feeling the heat of the downturn, TVS & Sons aims to capitalise on its long-term relations with customers through attractive service propositions. Besides OE, it is leveraging and expanding its infrastructure. Recently, it introduced a toll-free service line for CV clients who can now call and get a vehicle service done at any time across states where the company operates. At present, this service is fully operational in Tamil Nadu and is slated for rollout in Karnataka and Kerala and later in North India.
On other fronts, TVS & Sons, which is one of India’s largest automobile spare parts distributors, is going all out to reduce working capital costs to the retailer. The company sells over 35,000 part numbers, manufactured by over 80 suppliers, and caters to over 8,000 customers. “We are operating at 80 percent filtration. We do same-day delivery in most cases,” says Raghavan.
The company also claims to have India’s first central warehousing facilities at Madurai, Ernakulam and Yashwanpur with a modern IT infrastructure for smooth procurement and deliveries
The parts retail market, being largely unorganised, remains a significant opportunity as OEs cater to only 20-25 percent of the aftermarket through dealers and 75-80 percent through distributors and others. The company also runs TVS PartSmart, an extended arm of distribution business and is a franchisee model. Raghavan says the company is now exploring ways to establish micro warehouses and enhance its distribution footprint. All in all, TVS & Sons is actively exploring new business areas to drive growth. 

INTERVIEW WITH G S RAGHAVAN, CEO & GLOBAL PRESIDENT, TVS & SONS

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How was the performance of the distribution and dealership business in 2013?
Last year was pretty challenging, especially when you are predominantly into the commercial vehicle segment, However, the year gave us, as a company, the opportunity to re-look at ourselves and work on the processes, efficiencies and transformation.
We have had the opportunity to make the business more nimble and create a platform for us as the market begins to unfold.

How much do dealerships and parts distribution contribute to revenues?
It is about 50:50 but we are not looking at topline because the vehicle sales are clearly double. There is a big focus on distribution and the application of modern techniques warehousing, supply chain management and serviceability.

How do you foresee the new fiscal turning out?
I think the current sentiment will prevail for the first six months of 2014-15. Then we will have to wait for real developments to take after the elections. People are looking for some momentum which, we hope, will happen once the decisions on infrastructure — whether its power projects, telecom or mining — are taken. I am optimistic about FY15 as compared to FY14.

What are the challenges in the dealership business?
The dealership business structure will change fundamentally and it has to change for good. There are two sides to it. Firstly, the dealership business is currently getting tied up into the real estate business; it is not profitable or viable if you don’t manage your real estate business because that is the big cost that lies beneath. With land prices going up, and if you want a professional dealership business, it could be unviable on the current scale.
Secondly, RBI is tightening financial norms. The working capital that is available to the dealer is getting squeezed. These are two significant issues not in a dealer’s control but it is a key factor to be taken into account. Add manpower issues and these put together translate into significant costs.

Do you see the slowdown affecting both parts of your business?
Yes because the last time around during the recession, the distribution business was doing well as the vehicles were running even though new sales were down. However, this time because the slowdown has got prolonged over 12-18 months, there has been a 30-40 percent drop in the vehicles that are on the roads. So when the numbers are down and the economy contracts, service and spares get affected equally.
In the distribution business, we have managed to retain our market share but in terms of absolute sales we still haven’t got the growth push. The entire automotive ecosystem gets affected — whether it is finance, distribution or vehicle sales — because 18 months is too a long period to sustain on negative growth.

How are you dealing with spurious parts?
Obviously OEMs are concerned and are taking the necessary steps. But if you look at the market, it is changing. It is divided between three structures — OEs parts, OE parts and white label parts. I think white label parts with modern practices will replace spurious parts with good quality and without any legal and ethical issues.

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