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The Rediff Business Interview/Venu Srinivasan

'Indian customer is not aggressive in his demands'

Venu Srinivasan, chairman of the Rs 10 billion TVS Suzuki, received his first lessons in business as a car mechanic in the TVS garage. From the day he completed his tenth standard, he had to put in eight hours a day in the garage during the annual vacations.

The grandson of legendary businessman TVS Sundaram Iyengar did not receive any special treatment in the garage. "There was no question of me not reporting for work in time during those gruelling but enriching days," Srinivasan recollects. The only privilege was that he could sneak into his cousin's air-conditioned office when the garage got really hot, and have a cup of coffee and biscuits. But he loved working under the cars, overhauling engines and getting his uniform dirty.

Of late, though, he is busy in his role as chairman of the Society of Indian Automobile Manufacturers, espousing the cause of improving fuel quality in India, in the wake of the row over Euro norms. TVS Suzuki is also in the news for its four-stroke scooter, which is apparently eco-friendly, unlike those made by other companies.

Srinivasan discussed these and other issues in an interview to Shobha Warrier. Excerpts.

At a time when Bajaj Auto, the leader in India's two-wheeler market, registered a negative growth of 7 per cent in 1998-99, TVS Suzuki grew by 16.5 per cent. How did this happen?

Sometimes I think you want us to talk about what we don't understand. But I think our growth is because of the changing preference in the market to motorcycles away from scooters. The conventional scooter has consistently shown a decline in the market share in the last three years. It is because the youngsters prefer motorcycles to scooters.

To the youngster, the motorcycle makes a statement, which the scooter does not. Secondly, the rural markets have grown much faster in the last three years. And rural market is totally motorcycle-driven. So, on the whole, motorcycles move much faster than scooters. And scooters form a significant portion of Bajaj's sales. I think, Bajaj will be launching new motorcycles and may continue to lead the market.

The sales of your gearless vehicle Scooty have also risen considerably. Is it because more and more women have started using gearless vehicles?

What has happened is, the moped market is split into three now, the step-through market which includes Bajaj M80, Kinetic K400 on one side and on the other side, you have Scooty, Wave, Trendy, Sunny Zip, etc, and all these are light scooters costing between Rs 15,000 and Rs 20,000. That is one market.

Then there are the traditional mopeds, the Kinetic, Hero and TVS. So, Scooty represents people who have scooter aspirations but do not really want the weight of neither an old metal scooter nor the gears. They want convenience. That is why vehicles like Scooty have become popular.

Today no girl buys a moped. The starting point itself is Trendy, Sunny, Scooty, Hero Winner.

A one-year-old Maruti is Rs 100,000 cheaper than a new one. And a four-year-old four-wheeler is available at the price of a new motorbike. Where do you see the two-wheeler market going from here?

Yes, I learn a three-year-old Maruti car can be bought for Rs 30,000 while a new high-end motorcycle is priced at Rs 60,000. So, second-hand cars and motorcycles are now reaching an overlapping stage. I think that will pose new paradigms.

Which market will be affected by the clash of the second-hand cars and high priced mobikes?

Clearly, Rs 50,000 will be the kind of limit I see for the large volume two-wheelers. You may get 150cc, 175cc bikes for Rs 60,000 or Rs 75,000 but clearly the volumes of those products are going to be limited compared to the CD 100s, AX 100s and Calibers which are available for Rs 45,000.

I am sure the scenario will not be one replacing the other. Another interesting feature we see developing in my own company is a car-and-a-two-wheeler family. The husband uses the two- wheeler to commute to his office. He buys a Rs 60,000 second-hand car and uses it on weekends or the evenings when the family goes out. Rs 60,000 is not too much of a capital expenditure, it is something he can afford to keep as a luxury. But the maintenance of a used car is higher, so he uses it as a second vehicle. But the first vehicle will be his two-wheeler.

Which vehicle will this person buy?

It depends. If he is younger, he will buy a motorcycle. If he is older, it will be a scooter. What we see today is, scooters are generally tending to become the preferred vehicle of only the older age group. And the vehicles of the future are the ones that the younger age group buys. So, there will be a tremendous market for motorcycles.

We can look at it this way too. What will make the younger age group buy a scooter? I am not talking about the Scooty segment. Scooty is no problem and it will survive very well because young girls and some young boys buy it. When they become more powerful, the young boys go for only a motorcycle.

How can we make the boy to say, no, I don't want a motorcycle. I will buy scooter and zip a little more? See you can play games with a scooter. You can style it more sportingly. But I think if you want the younger people to use the traditional scooter, the 150cc geared one, we need to crack the segment. What is in the younger people's mind? What kind of design do they like? What will make them accept a scooter almost on equal terms with a motor cycle?

You might have conducted surveys. What did your research team find out?

I am not going to discuss that because that is really the key. The companies that find the key will certainly have an advantage.

Last year, you said it was possible to sell a mobike for Rs 100,000. Do you still hold that view?

At that time, Rs 75,000 was the limit for the high-end bike. But now it has come down to Rs 60,000 because the prices of second-hand vehicles have fallen steeply. I still believe that the market for recreational two-wheelers is going to be very, very limited in India. A thousand vehicles a year itself is high volume for that kind of market. If you make a 250cc, two-cylinder, four-stroke machine, I don't think you will be able to sell a significant volume.

The TVS Spectra, the 4-stroke, 4-geared scooter, has not clicked in spite of the fact that it is eco-friendly. Why?

We are barely reaching 2,000 vehicles a month which is not great volumes. Last month, we sold 1,700 or something but we are confident of reaching 4,000 mark by September. But that still is not the kind of volume that we would like to see. We would like to see a figure of 10,000. For that, we have to crack the young market.

They can relate only to motorcycles and are not able to relate to scooters. That is why we need to crack the segment.

Do you feel people are mileage-conscious because India is poor?

Certainly. The single most concern of all vehicle-users is usage cost, the mileage. The single most usage cost in India is the petrol price. Petrol is unfortunately priced high to subsidise kerosene and LPG (liquefied petroleum gas used for cooking). Kerosene and LPG are subsidised on the assumption that all petrol-users are rich which is not so. I don't believe that the scooter- and moped-users are rich people. I think people who use diesel cars are richer than those who use mopeds and scooters. Therefore, I feel diesel should be priced high. It is the middle class who use scooters and mopeds who are paying a high price.

When TVS started making mopeds in 1979, your father wanted to design and develop an affordable two-wheeler for the Indian family. Now the average Indian family does not use a moped as a family vehicle. How has your company factored in this aspect?

Today the moped has two completely different uses. One, it is used for commuting by the lower middle class. Two, another group uses it as a utility vehicle. Many people who use it as a utility vehicle have motorcycles and they use them to move out with their families. This man uses the moped during the work time. So, we find every interesting patterns emerging.

For example, a dairy farmer with four or six cows uses a moped to deliver the milk to the market because it is economically justified. The look of the vehicle is immaterial then, only the utility factor comes into play. But if he has to go for a marriage, he will not use the moped. Instead, he takes his wife to the wedding on his motorcycle.

Do you plan to enter the small car segment?

No. Because the two-wheeler penetration in the rural market is so low compared to ASEAN countries that I feel there is a big universe out there waiting to be serviced. So, it would not be wise for us to even have anything other than two-wheelers in mind.

Because two-wheelers offer only personal transportation, a lot of people may think, why not enter the four-wheeler business. But four-wheelers are a distinctly different business. The capital needs, the technology needs and the competitive pressures make it a very different ball game. The magnitude of cash flow is hundred times more than that of a two-wheeler business. Just because you make two-wheelers, four-wheeler is not an automatic extension. It is actually discontinuity.

Three wheelers, I don't know, may be a possibility. But three-wheelers have not succeeded anywhere. For whatever reasons, customers feel that it is unstable. Nowhere in the world, the three-wheelers have taken off other than a niche product or like the Bajaj Auto as a commercial product. For personal transportation, three-wheelers have not succeeded.

Is it true you want to tap rural India?

When I say rural, I mean the small towns. A state like Kerala, which I think is a long suburb, where per capita consumption has increased dramatically, can be a good target. So also the smaller towns in Maharashtra, Gujarat and other states where the capacity to absorb smaller vehicles is increasing. So, in the next ten years, I do not see us making anything other than two-wheelers. Beyond 20 years, I do not know.

Has the purchasing power of the Indians increased a lot in the last ten years?

Yes. They have shifted from mopeds to scooters and motorcycles. If we had tried to sell a Scooty in 1980, we would have found only a very small market. But in the nineties, it is a huge market. Throughout the world, there is a tremendous desire for personal mobility. Why do all the Americans buy cars? After Margaret Thatcher's time, when England prospered, all the people bought cars and now all the roads are clogged. If you use public transport, you are more dependent on somebody else's timing. Even if the traffic snarls, you are on your own if you have your own vehicle.

With more and more vehicles on roads, cities have become polluted and traffic systems seem to be breaking down. Do you feel only bicycles and two-wheelers should be allowed on city roads?

If you ask me, we should see only public transport systems inside the city. Yes, people in the cities are worried about pollution. We have to look seriously in providing clean fuel. The Indian diesel is unbelievably dirty. Even the new ultra low fuel has 0.5 per cent sulphur whereas the European standard is 0.003 per cent. The ultra low fuel is moving to 0.25 per cent which is hundred times more sulphur than the European fuel. We at the automotive association are demanding a fuel which has 0.05 per cent sulphur.

We have got 5 per cent benzene in our petrol, which is a toxic carcinogen but nothing is being done about it. We would like to see 93-octane fuel. There is no reason why we can't have it when we are making oxygenates to increase the octane number. But we are exporting oxygenates instead of adding to the Indian fuel. This is a very major fuel problem.

I think we should look at alternate fuels seriously. I think all commercial vehicles should run on LPG, propane or other alternative fuels. LPG stations exist abroad. Taxis in Japan run on LPG. I think we must promote LPG as a city fuel. Even scooters can run on LPG. This is well within the ability of the government to implement but they are not doing that.

We have been talking about circular railways but where is it? Delhi still has not got a transport system worth the name. Why are these things not happening? I don't think there is a holistic, multi-disciplinary approach to city traffic in terms of pollution, congestion, etc, and different people are saying different things.

Environmentalists come and say, ban this and ban that. And they are right because the air is so bad. But banning anything is not the solution, we have to provide an alternative.

How environment-friendly are your vehicles?

We will meet all the Year 2000 norms. People talk about two-stroke engines and four-stroke engines but my point is that, two-stroke engines with catalytic converters will meet the 2000 norms. Then, people ask, what about the life of catalytic converters? All the cars fitted with catalytic converters also have a limited life span. They run some 80,000 kms, which in other words, means five years. For two-wheelers, it may be 30,000 kilometres or four years. You may ask, what happens after four years? My question is, what happens to cars after five years? But with catalytic converters, we are able to meet the norms and we will be as environment friendly as any other product.

What kind of relationship do you have with Suzuki? How much have you two benefited from each other?

We have a very good association with Suzuki. In fact, now we are launching a 4-stroke, 150-cc motorcycle. We have been able to provide them with good marketing outlets as we have a good market and brand position. So, that is the benefit they get plus we pay for the technology and parts. So, it has been a very mutually beneficial relationship.

What is your vision for TVS Suzuki?

We would like to have a market share of 23 per cent of the Indian two-wheeler market. At present, we have a market share of 19 per cent. We will cross one million vehicles by next year.

We are a hardworking company, sometimes monotonously so. But I think it is much more than work. It is setting directions, looking at technologies, marketing surveys, etc. But most important of all is the customer. Unless you understand the customer and give the customer the benefits he is looking for, you will not be successful.

Having got a feel of what is happening in other markets, do you think Indian customers have become demanding now?

I don't think the Indian customer is as demanding as he should be. He should be far more demanding. I feel the Indian customers can bargain for better things. We would provide better things if they were a little more aggressive in their demands.

Photographs by Sreeram Selvaraj

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