TVS continues to flag rare-earth magnet crisis, hopes GST reforms to boost H2 sales
India’s third largest two-wheeler manufacturer TVS Motor Co. Ltd on Tuesday reiterated its short- and medium-term concerns over the availability of rare earth magnets, describing it as a significant challenge for its electric vehicle (EV) business.
But while announcing its September quarter results, it said the recent goods and services tax (GST) rate cut, which is fully passed on to customers, is expected to create a “multiplier effect”, supporting sales growth in the December and March quarters.
EV business
In the second quarter of 2024-25, the company’s EV sales (e-scooter, e-motorcycle and e-auto rikshaw) increased by 15% from 70,000 to 80,000, respectively. EV sales were at 75,000 in last year’s quarter.
“The availability of (rare earth) magnet continues to pose challenges in the short to medium term,” management said during the post-earnings investor call.
“So, probably if magnets were available, I’m sure the industry would have done much bigger business. This is just 8% growth,” said KN Radhakrishnan, director and CEO of TVS Motor.
He added that demand for electric vehicles remains strong. Turnover from the electric vehicle business is approx. ₹1,269 crore and “contribution margins in the segment were positive”.
GST rate reduction increase
Cuts in GST rates are expected to boost demand across various categories in the second half of the financial year.
“GST reforms will help rural sales. I am generally confident that rural will start growing in line with urban growth and you will see the growth in the coming days,” Radhakrishnan said.
Savings for entry-level two-wheelers, including mopeds and motorcycles, are approximately ₹The company said a move to 7,000 would support the growth of the industry.
The company’s total sales, including international markets, increased by 18% sequentially from 1.3 million units to 1.5 million units. Compared to the previous year quarter, sales increased by 23% to 1.23 million units.
Revenues increased by 15 percent sequentially ₹14,051 crore ₹12,210 crore and 26% p.a. ₹11,197 crore, mainly driven by increased demand.
TVS was able to control expenses, which increased its profitability; net profit increased by 30% sequentially ₹833 crore onwards ₹643 crore and 42% annually ₹588 crore.
“Among brands, TVSL, Suzuki and Royal Enfield continue to outperform with market share gains, while Hero Moto Corp. (HMCL) recorded healthy rural-focused growth,” Yes Securities analyst Deep Shah wrote in an October 26 note.
“While the new Jupiter 110 is a big driver for increased sales as highlighted in previous check notes, other brands, especially Ronin and Apache (in non-strength markets), are increasing in appeal. For example, TVSL’s market share in Gujarat has now increased to 13% compared to 9% in FY25. The bulk of the share gain is coming from HMCL,” he added.
TVS Motor shares closed down 2.31% ₹3,555.00 on BSE, while the benchmark index Sensex closed 0.18% lower.
