'Positive about the performance of the Premium motorcycle segment and scooter segment with improved urban demand,' says TVS Motor

Two-wheeler maker TVS Motor has stated that it is positive about the performance of the Premium motorcycle segment and scooter segment with improved urban demand.

In the company's Annual report 2022-23, management stated that as the company steps into fiscal 2024, it maintains its cautiously optimistic view of the future. 

GDP growth for fiscal 2024 is expected to be around 5.5% by various sources, in spite of the difference in the specific forecast, the almost common agreement is that India GDP growth will remain the highest among all major economies. This performance would be based on underlying socioeconomic fundamentals with active policy management. Some of the key active drivers include pick-up in urban discretionary consumption demand especially on services such as travel, tourism, and hospitality, improving consumer sentiment as indicated by RBI's Consumer Confidence survey, moderate global crude oil prices, higher disposable income among mid-income group by introducing tax reforms driving higher consumption, improved investment climate for economies with well regulated banking and financial markets like India and highest ever capex outlay of Rs 10 lakh crore in the Central Government budget 2023-24.

The company stated, rural recovery continues to be slow and this significantly impacts the growth trajectory of the economy. El-Nino arriving early and affecting monsoon may lead to a weaker performance of the rural agricultural sector impacting the already weakened rural demand. Domestic Moped and Economy motorcycle segments have seen constrained demand due to weak performance in the rural non-agricultural sector, a poor monsoon could further adversely impact demand. The company is positive about the performance of the Premium motorcycle segment and scooter segment with improved urban demand.

Over the long term, the Indian economy is expected to increase by around 2.5x to $6.5 trillion by 2030, with a real GDP growth rate in the range of 6-6.5%. Per capita income and vehicle ownership is expected to double by 2030, ushered in by formalization, digitisation and urbanisation. The improving road infrastructure and economic environment with our current mass transit systems will further drive the demand for mobility for the masses. This demand is today best served by the 2-wheeler segment, making its fundamentals very attractive considering a resurgent India.

Export of two-wheelers is likely to see growth during the year after the weak performance in 2022-23. The African market is expected to perform better in 2023-24 recovering from the global slowdown and with moderation of inflation. Expansion programs in LATAM, ASEAN, and the Middle East will add further momentum. Falling freight rates and better availability of containers are likely to support exports from India this year.

The company stated that overall India's long-term growth trajectory is based on a few persistent and unique socio-economic assets or drivers including a large population supporting the domestic demand, a growing and youthful skilled educated cost competitive workforce, a vibrant private sector with large enterprises and MSMEs eager for growth, access to vast natural resources, consistent political leadership and rising penetration of discretionary consumption, rapid adoption of digitization across all strata of society increasing velocity through reducing wastage and a new wave of entrepreneurship aided by the improved ease of doing business.

"Due to the above fundamentals and its strong product lineup, unwavering focus on consumer, quality, cost, the company is confident going into 2023-24," said in the Annual report. Last year the company incurred Research & Development Expenditure of Rs 494.62 crore.

On the supply chain issues, the company said the broader risk of supply chain disturbances is expected to be lower than the previous years. However, some EV specific components may continue to face challenges leading to delayed service levels and impacted financial performance.

The company manages a diversified, multi-source, global supply chain. Any new developments arising out of geopolitical strife, which impact the global supply chain, causing short-term or mid-term disruptions in the supply of essential raw materials or utilities could also have an impact.

On the EV, the company is optimistic about the segment stating that the EV industry will continue to grow rapidly as the consumer interest is buttressed with active policy support from the Central and State Governments through PLI, FAME II and State-specific support policies. Continued support will ensure a smooth lift-off for the industry volumes.

It will deliver the "power of choice" as it enhances the offerings to provide relevant options to new consumer cohorts, in doing so, expand the portfolio to new variants within iQUBE and introduce new brands.

This portfolio expansion will also see the introduction of new innovative features and technology. The choice will be made available in new geographies within India, beyond the current 130 towns, and outside India, as the company's EV exports kick in. All of this would also see a steady increase in the ecosystem presence and the 2000-plus public charging options grow further.