TVS Motor Company Flame, a 125cc motorbike, with a single-spark plug ignition system. The move comes in the wake of the Madras High Court restraining the country’s third largest two-wheeler maker from making and selling Flame for using the controversial twin-spark plug system. A legal tussle is currently on between TVS Motor and Pune-based Bajaj Auto over alleged patent infringement by the former in Flame. The battle between Bajaj Auto and TVS Motor started in September 2007 over a technology called digital twin-spark ignition (DTSi).
Bajaj Auto had accused Chennai-based TVS of illegally replicating its patented DTSi technology in TVS Flame. However, TVS responded that Flame was fitted with a three-valve engine based on CCVTi (Controlled Combustion Variable Timing Intelligent) technology, which is different from the technology used by Bajaj Auto. The issue subsequently went to court. On February 19, the Madras High Court passed an interim order barring manufacture and sale of TVS Flame using twin-spark plug ignition technology. TVS Motor went on appeal against the verdict.
The high court ruling came as a major setback for TVS Motor, which has been reeling under falling sales and profit figures. The company was hoping that Flame, launched on December 13, 2007, would boost sales volumes and strengthen its presence in the executive segment, which constitutes over 50 per cent of the motorcycle market.
The revenue losses for the company on account of this were estimated at Rs 100 crore for the current quarter, according to TVS Motor Chairman and Managing Director Venu Srinivasan. Addressing reporters at the relaunch of Flame, Srinivasan said that the new Flame was powered by three-valve CCVTi engine technology, developed and patented by Austria-based AVL, which has licensed the technology to TVS in India. “Nothing has changed in this vehicle except the single-spark plug,” he added.
The modified Flame carries a price tag of Rs 46,000 (ex-showroom). The company expects to sell about 15,000 units this month and aims to take it to 25,000 units a month by October this year. The 600-odd Flame vehicles lying with dealers would be reconfigured with single-spark plug ignition, Srinivasan added.
TVS Motor expects to garner a market share of 12 per cent initially in the executive segment. Flame is also expected to boost export sales of the company as it plans to export to several countries. Exports are expected to account for about 10 per cent of the company’s top line by the end of the current financial year, according to a company official.
Interview with Venu Srinivasan:
Customers don't buy a spark plug, they buy a bike'
Venu Srinivasan is confident that his company will see a stronger bottom line in 2008-09, thanks to the 125cc Flame motorcycle and its first three-wheeler. The chairman and managing director of TVS Motor tells DNA Money's Murali Gopalan that the two-wheeler industry will, however, see flat growth. Excerpts: Budget 2008-09
Have the past few months been particularly difficult for your company?
Well, I must admit these have definitely been testing times for TVS Motor because there has been a court battle going on and we have not been allowed to launch the product. In January and February, my estimate is that we lost at least 15,000 units (of the Flame) a month.
Is this what prompted you to go in for the single spark version?
We had to make the three-valve engine work on a single spark plug over a rather short period. Conventional wisdom has it that three valves work with two spark plugs but thanks to the AVL technology of dual port (swirl and tumble) intake, we managed to make it work with a single spark plug with equal efficiency and less harshness. In the process, this has been a huge benefit for the Flame and we are confident of selling 15,000 bikes in March going up to 25,000 by October.
Do you think the product's acceptance could be impacted with one spark plug less?
Ultimately, the customer does not buy a spark plug but a full-fledged motorcycle. It is part of an overall package eventually and having ridden the single spark Flame, I am sure it will be a winner. This is the hottest bike going around in terms of looks and performance. In the process, it does not sacrifice on fuel efficiency either which is its biggest USP. The AVL patent licensed to us is unique and offers the optimal mix of economy and power.
What is finally of any relevance is the Flame in toto and not the number of spark plugs in it. The spark plug has other implications in terms of what is the basis on which you can get patents or use technologies. That is a serious matter of law that we will appeal and continue in court.
The Flame is a fantastic bike, delivers great performance, styling and mileage. It gives a terrific riding experience. The bike competes in the premium executive segment which is priced at around Rs 45,000-plus and offers enormous value for money.
What is your outlook for TVS in 2008-09?
We are looking at a 20 per cent growth in terms of volumes. The new three-wheeler, TVS King, should do at least 20,000-30,000 units. We will have a complete bike portfolio which covers the range from 100cc to 160cc. There will also be another completely new two-wheeler coming out next fiscal.
Today, our product lineup is quite impressive and in volume and profit terms, it will make a significant difference. I expect 100cc bikes to take up 60 per cent of our portfolio while the 125cc-plus models will account for the balance.
Why has the transition to 125cc not been as quick as anticipated?
With the kind of petrol prices you see now, "economy" still dominates the mind of people when they use a bike. No 125cc bike is going to give you 75 km to a litre. At best you can do 65 kmpl. In contrast, TVS Sport, which is the most economical bike in the market, offers 83 kmpl.
Oil futures (for 2010-11) are already trading at $160 a barrel and manufacturers will constantly be under pressure to offer more mileage on bikes. Hence, I am certain that at least 60 per cent of the market will continue to be 100cc bikes priced under Rs 40,000. Even though incomes continue to rise and people may not mind paying more for power and styling while compromising on mileage, the transition will be slow.
Do you see better times ahead for two-wheeler sales with the excise duty cut?
The reduction in excise duty will give a fillip for sure in the medium-term, similar to what was seen in small cars. However, there is a slowdown in availability of credit and that is dampening the market. An excise duty cut does not give a person the capital to buy a bike. What people want is money to pay their EMIs.
I believe 2008-09 will see flat growth for the two-wheeler sector. The liquidity crunch issue has been digested in a way by the market because it has already been around for 15 months now. The equilibrium has been reached and no further reduction is going to happen.
Are there still dark clouds on the horizon?
Yes, I would think so and what is especially worrying is that manufacturing industry exports are not increasing. With the pressure on the dollar, service companies are also being impacted in terms of salary cuts and jobs. Spending is driven not by the economic availability of money but also the mood which is slightly sombre now.
The lack of credit availability and this sombre mood are the key issues for this current state of affairs but I do think that we will be out of the cycle by the year end. There should be some marginal recovery by October-November. The short term will also see important events like the US elections and consequent new policies, high oil prices, China contracting for iron ore at 65 per cent higher prices and other critical issues. There'll be some volatility across the world which will impact India.
Will the TVS King be sold jointly with bikes?
We have started off with the same locations for retailing two and three-wheelers but ultimately, this will be done separately. The key is to give dealers the desired volumes which will happen from June when the four-stroke version of the King also comes in.
In Bangalore, for instance, this is mandatory and the vehicle has, therefore, only been put for display in the two-wheeler showroom as of now. When the four-stroke begins selling, we will definitely have an exclusive showroom but with the same two-wheeler dealer.
These can be low-key outlets and do not need to be large or flashy like those used to showcase cars or bikes. The key is to be present in all strategic locations especially after the entry of the cargo version 18 months from now.
Finally, what new technologies do we see from TVS?
Alternative technologies pose a challenge and concern in terms of costs. You will need to spend Rs 5,000 for a new battery replacement in a bike that could cost only six times as much. These are hard realities that cannot be wished away. Nickel and lead pieces, similarly, continue to be high.
We talk of alternative fuels but the minute you opt for CNG, it means an added cost for the kit and cylinder which do not come in cheap. Similarly, the number of LPG dispensing stations is hardly anything to write home about. I am unable to see any breakthrough (hybrids, fuel or electric technology) which can be viable for the two-wheeler buyer.
Bikes will get lighter with greater use of aluminium and plastics. Tyres could also get harder and narrower. This direction in technology will continue unabated and there will be breakthroughs happening as we go by. All the while, we need to cope with the pressure of costs and challenge of mileage.
