Presentation plan

1. Industry dynamics and attractiveness

2. Transformation of TVSM

3. TVSM – New initiatives

Nov’05 1
 Global two wheeler market - 2004
Size of the total market : 36 million numbers
Figures in %
42

18

11
15
4
2 3 5
China India Indonesia Vietnam Thailand USA Brazil Others

India second largest market

Indonesia emerging as a major market with excellent opportunities
Nov’05 2
 GDP / Penetration levels
PARC (Ratio of motorcycles/1000people) 2004

750 590
GDP per capita in $ at PPP comparison 600
2003 450
286 258
300 140
150
90 37 52
0

17400

nd

a
a
a
an

di
si

in
18000

si

na
la
iw

ne

Ch
In
ay
ai

et
Ta

do
al
Th

Vi
M

In
15000

12000
8280 Yearly Sales per 1000 people for 2004
9000 6680
6000 4390 50
2,990 2570
2,240 40 32
3000
30 21 18
15 17
0 20 10
10
6
na
a
m
a

a
an

nd

si

di

0
si

na

i
iw

la

Ch
ne
ay

In
et
ai
Ta

do
al

Vi
Th

nd

na
a
a
an

m
In

di
si
si

na

hi
la
iw

ne

In
ay
ai

C
et
Ta

do
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Th

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In
Low penetration level in India and Indonesia offers tremendous opportunity for growth
Nov’05 3
 Two-wheelers on a roll
• The demand drivers for the two-wheeler industry are
– High growth in service sector @ 9%
– Favourable demographics – a young population, rising household
incomes, increasing literacy levels
– Faster introduction of new models
– Increasing replacement demand (from 6 to 3 years)
– Absence of effective public transport.
– Increased availability of low cost retail finance (more than 1500 locations)
Favourable
Rising personal demographics Increasing
aspirations, multi media path
ownership families

Indian two- wheeler India is one of the

Absence of
effective public Industry fastest growing
transport economies in the world
On a growth path

Shortening Organised retail Exports

replacement cycle finance is getting
deeper penetration

Nov’05 4
 Youngest population…
A young population
• India has the youngest population in the world with 70% under 35 years

• The key factors emerging are

• i)Target audience for two-wheelers is huge
• Ii)140 mn people will be added to the working population in the next
5 years’ time

A “Young” population … … which means a bigger opportunity

India China Germany Brazil
2003 2009E
> 60

7 10 23 8 0-14 365 391

35-59

23 30 36 26 15-35 365 449

15-34

35-59 240 295

35 35 26 37

> 60 73 87
0-14

35 25 16 29

Total population in mn 1,044 1,221

Source: ICICI Bank Source: ICICI Bank

Nov’05 5
 Bulging affluent middle class and
increasing consumption mindset

Number of households** (population), mn

Household Income Class 1995 - 96 2001 - 02 FY09 (E)

“ Rich”:
> Rs0.5mn 1.2 (7) 2.6 (15) 7.0 (40)
CAGR: 15%

“ Upper Middle”:
Rs0.3 - 0.5mn 33 (186) 46.4
46 (265)
(265) 91 (525)
CAGR: 10%

Target
“ Middle Income”: audience
Rs0.1 - 0.3mn 54.1
54 (312)
(312.2) 74.4
74 (429)
(429) 85 (490) for wo wheelers
CAGR: 2%

“ Lower Income”:
< Rs0.1mn 77 (444) 57 (332) 30 (177)
CAGR: (8%)

5555
million families
million (320
families million
(320 people)
million added
people) in in
added thethe
middle incincome group
middle ome group

Nov’05
Source: ICICI Bank, SIAM 6
 Changing face of retail finance
• Retail finance has emerged as an important driver of
growth for two wheelers in India.
• Retail finance rates have halved from 28% to 14% in the
last three years
• Organised retail finance availability has increased from
100 to 1500 locations in the last three years
• Innovative customer friendly schemes with low EMI
(Rs. 999 approximately) and low down payments have
become popular
Retail finance has become easier and affordable
Nov’05 7
 Two-wheelers to remain the preferred
option over Cars
– The ownership and maintenance cost of a car is
4 times of a two wheeler

– Two wheelers deliver a superior mileage of

70kmpl as compared to 12kmpl of the cars

– Mileage is a key factor influencing buying

behaviour.

Nov’05 8
 Two-wheeler industry sales trend – All India

Nos. in million
7.8
8

6.6

G R
6
% CA 5.6

1 6 5.1

4.3

3.8
4

2
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 est.

Outlook for two wheeler industry continues to be positive

Nov’05 9
 Two-wheeler industry – All India
Category share %
1999-2000 2004-2005
43
79

16

5
5
10
11
26
41

Mopeds Motorcycles Step thrus Geared scooters Ungeared scooters

Significant shift towards motorcycles category

Nov’05 10
 Transformation of TVSM

Nov’05 11
 Profile of TVS Motor
• Third largest two wheeler company with presence
in all segments

• Two state of the art manufacturing plants

• Total capacity 2 mn vehicles
Motorcycles : 1.3 mn
Mopeds/Ungeared Scooters : 0.7 mn
• Strong R & D and NPI capability

• Robust supplier base

• All India reach through excellent sales and service
network
Nov’05 12
 Changing product profile of TVS Motor

Composition of sales numbers in 1999-00 Composition of sales numbers in 2004-05

Mopeds
23%
Motorcycles
37%
Mopeds
45%

Scooters Motorcycles
19% 58%

Scooters
18%

Motorcycles dominate the portfolio with 70% value share

Nov’05 13
 Successful migration to 4 Stroke Motorcycles

Installed capacity (%)

2000-01 2005-06

90
99

1
10

2 S Motorcycles 4 S Motorcycles

Nov’05 14
 Enhanced all India Distribution network
404 Number of Dealers 509
March 2000 March 2005

48 77
12% 15%
101
147
25%
29%
102
122
25%
24%

153 163
38% 32%

North South West East North South West East

TVSM has unique two tier distribution network with exclusive

Dealers supplemented by more than 1000 Authorised service centres
Nov’05 15
 Regionwise motorcycles sales numbers
323 Sales in (‘000) 641
1999-2000 2004-2005

20
97
6%
15%
91 186
106 28%
29%
33% 148
23%

106 210
33% 33%

North South West East North South West East

Significant growth in all markets and Motorcycles sales has doubled

Nov’05 16
 Growing exports
Nos in ‘000s
100
85

75

49
50

28

25
8 10

0
2001-02 2002-03 2003-04 2004-05 2005-06 Est.

Exports will continue to remain a strategic focus area for growth

Nov’05 17
 Strong R & D
• World class facility employing over 400 engineers

• Partnership with leading international research institutes

• Successful launch of new products

Victor 110 / 125 cc 4 stroke motorcycles
Scooty PEP 75 cc 4 stroke ungeared scooter
StaR / StaR City 100 cc 4 stroke motorcycle
Scooty Pep+ 90 cc 4 stroke ungeared scooter

•R&D 2001-02 2002-03 2003-04 2004-05

Expenditure 1.5% 2.2% 2.6% 2.5%
(% of sales)
Nov’05 18
 Continuous reduction in cost
Savings per year (Rs. Million)
1600
Impact of
-Value engineering 1200 1030
1080
1000

-Global sourcing 860

800 640
-Lean manufacturing
-Waste elimination 400
0
2001-02 2002-03 2003-04 2004-05 2005-06 Est.

•Low cost channel finance to dealers (interest rate

reduced from 15% in 2002 to 8.5% in 2005)

Nov’05 19
 Summary of financials and key ratios
Rs. Million
Particulars 2003-04 2004-05 Apr/Sep'05
Total revenue 28564 29552 15620
EBITDA 2956 2909 1333
Profit before tax 2145 2005 824
Profit after tax 1385 1376 569
EPS (Annualised in Rs.) 5.83 5.79 4.79

RATIOS 2003-04 2004-05 Apr/Sep'05

EBITDA % 10.3 9.8 8.5
Profit before tax / sales % 7.5 6.8 5.3
Profit after tax / sales % 4.8 4.7 3.6

TVSM will drive top line growth through new products / innovation
and improve profitability through aggressive cost reduction

Nov’05 20
 TVSM – New initiatives

Nov’05 21
 TVSM – Strategy for growth
• Secure product leadership by
– Introducing brands that break compromises for customers.
– Offering the most innovative ‘package’ of product, access and
finance.
– Faster introduction of Refresh / upgrades

• Forge TVSM into an organization that is ‘fit for growth’ by

– Delivering best-in-class durability & reliability
– Building a lean and flexible manufacturing with faster ramp-up
capability.
– Aggressive global sourcing
– Sweating assets to the maximum.
– Leveraging the power of IT across core functions.
• Accelerate development & deployment of energy-efficient
technologies.
Nov’05 22
 Faster introduction of new products
40

35

30

25

20

15

10

Nov’05 23
 New headlamp & fairing with
halogen bulbs & city lights New electric blue
console lights

Sporty angular
exhaust -Night glow switches
-Push cancel indicators
-Pass beam switch

Widest tyres

Switch shox RCF technology

(Ride switch in shock absorber) (for improved mileage of 102 kmpl)
Nov’05 24
 Growing popularity of TVS StaR
Oct’05
Sep’05
52000 nos
46000 nos
260 June’05
25%
000s)

30000 nos

MS in Economy Segment
20%
Cumulative sales (Nos in '

195

15%
130
Mar’05
18000 nos 10%

65
5%

0 0%
J a n '05 Fe b '05 Ma r '05 Apr '05 Ma y '05 J une '05 J uly'05 Aug'05 S e p'05 Oc t '05
Month
Sales nos in '
000s Market share

Nov’05 25
            
        
 
  

  
      
      
     



 
 

   
            
  
    
 
           
26
      
Nov’05
 Ungeared Scooters - growth through Innovation

(nos. in 000’s )
300

270

2 0 %
of
250
r a te
w t h 224

Gro 190
200

152
150 143

100
2001-02 2002-03 2003-04 2004-05 2005-06 est.

Years

Nov’05 27
 Victor Edge – the value advantage
& " "
" "" "
% "
" "

! "
# $ "
%
%"

& " !'(

"
"
%"

Nov’05 28
 Complete product range

50000
Fiero
45000
Ex-Showroom price-Bangalore (Oct’05)

40000 Victor

35000 Centra

Scooty Pep StaR

30000

25000

20000 XL Super / Heavy duty

15000

10000

MOPEDS UNGEARED MOTORCYCLES

SCOOTERS

A complete portfolio with product at every price point

A new 150 cc motorcycle will be launched in the second half of 2005-06
Nov’05 29
 TVSM sales estimate for 2005-06 Growth rate of
20%
Motorcycles Growth rate of
1000 25% Ungeared scooters
300
850 270

750 679 225

225
000s

Nos in '000s
485
Nos in '

500 139
365 380 150 131
119
299 106

250
75

0
0
H1 H2 Full year
H1 H2 Full year
2004/05 2005/06
2004/05 2005/06

Growth rate of Growth rate of

6% 20%
Mopeds Total
300 280 1500 1400
263

1167
225 1150
Nos in '000s

000s
143

Nos in '
767
150 130 137 133 800
633 619
548

75 450

0 100
H1 H2 Full year H1 H2 Full year
2004/05 2005/06 2004/05 2005/06

Nov’05 30
 TVSM Market share
84 Mopeds 50 Ungeared scooters

78 75.6 40
74.3 74.6 34.2 34.3
73.0
29.0 30.1
72 30

66 20

60 10
2003-04 2004-05 Q1 05-06 Q2 05-06 2003-04 2004-05 Q1 05-06 Q2 05-06

Motorcycles Total two-wheelers

21
20.0
4 S Motorcycles 2 S Motorcycles
16
4.0 19 17.8 17.8
17.7
1.0
12
16
8
12.0 12.0 12.6 12.7

4 14

0
2003-04 2004-05 Q1 05-06 Q2 05-06 11
2003-04 2004-05 Q1 05-06 Q2 05-06
With the launch of new products, TVSM plans to improve market share in the second half
Nov’05 31
 Growth thru’ market / product expansion

StaR city

New
Bebek two wheelers
Scooty Pep+
in Indonesia,
New 150 cc Motorcycle
Thailand, Vietnam,
Three Wheelers
Product

Victor variants,
Colombia,
Old

Fiero, Centra,
StaR basic, Nigeria, Iran,
Mopeds and Brazil
Scooty

Old New

Markets

Nov’05 32
 Indonesia project
•Third largest two wheeler market in the world
•CAGR of 15% over last 10 years
•Investment of 70 mn USD planned in two phases to
create capacity of 300 k

•Government approval for project obtained

•Land purchased and product development on

schedule
•Launch by Dec’2006

Nov’05 33
 Three wheeler business – a new
Growth engine for TVSM
• Highly profitable segment with a market size of 360 K
valued at Rs. 25 bn ( 600 mn USD) with CAGR of 10% over
last 10 years

• Attractive export opportunity (current exports 6 K per

month)

• Investment of 25 mn USD planned for annual capacity

of 100 K vehicles

• Launch by Dec’ 2006

Nov’05 34
 Himachal project
• 40% of Motorcycles are sold by TVSM in North and East
India

• Investment of Rs. 90 crores planned for an annual capacity

of 300 K Motorcycles

• Land purchased and construction of factory building in

progress

• Commercial production by 1st quarter of 2006/07

Nov’05 35
 Summary
• Long term growth prospects for the industry is attractive

• TVSM poised to grow ahead of market through strong

innovation and faster upgrades

• Exports will be a key thrust area and will contribute to 10%

of sales
• Indonesian project will be an adjacency to current
operations and will improve geographical insurance

• Entry into three wheeler will enhance product portfolio

• Focused efforts to reduce cost will improve profitability

Nov’05 36
 Awards and Accolades
2002 – Deming Application prize ( First powered two wheeler company
in the world to be awarded this prize for TQM )

2002 – Best Technology award for TVS Victor from Ministry of

Science and Technology, Govt of India

2003 – Best managed and most investor friendly company by

Business today

2004 - ‘Best design’ award in the two wheeler category for Scooty PEP from

National Institute of design and Business world

2005 – ‘Mother Theresa’ award for best Corporate citizen

Nov’05 37
 Thank you

No part of this presentation is to be circulated, quoted, or

reproduced for any distribution without prior written approval from
TVS Motor Company Limited, PB 4, Harita, Hosur-635109,
Tamilnadu, India. Certain part of this presentation describing
estimates and future plans may be a “forward looking statement”
within the meaning of applicable laws and regulations. Actual
results might differ materially from those either expressed or
implied. This material is not a complete record of the discussion.

Nov’05 38