TVS Motor Co. is looking to add an essential piece to its product portfolio in 2025. With the Indian two-wheeler market witnessing fast expansion in the 400+ cc segment, the auto major plans multiple Norton motorcycle launches, a British legacy biking company it acquired back in April 2020.
The company has announced launch of six new models under the Norton brand over three years. However, the first launch is expected only at the end of calendar year 2025.
TVS has said that it is looking to further invest in the brand over the next six quarters and the products launched will be more affordable than the current lineup, it said after it announced its first quarter results.
The company has invested almost Rs 1,200 crore in the brand since acquiring it and while these are all investments for the future, the turnaround, as per market watchers and auto enthusiasts, has taken quite a while.
The Broader Picture
Over the last decade, Indian auto majors like Bajaj and Hero have tied up with legacy two-wheeler companies like Triumph and Harley Davidson to fill the gaps in their respective premium portfolios. This has helped them compete with Eicher Motors Ltd., which operates the Royal Enfield brand and has in the country been a dominant player in the higher engine capacity bikes.
Competitors Fasten Premium Push
Bajaj Auto Ltd. has been the most proactive with tie ups with KTM, Husqvarna and most recently the Triumph. While KTM helped Bajaj Auto capture newer market in the early 2010s, the company's recent partnership with Triumph—with the launch in the 400-CC segment—is set to deepen its presence in this new segment. They have a current capacity of 10,000 vehicles per month and are looking to double this by the end of this fiscal.
Meanwhile, Hero MotoCorp Ltd. has recently tied up with Harley Davidson, which led to the return of the legacy American brand back in India. They launched the Harley Davidson X440, which competes with the likes of Triumph in the 400-CC segment.
For Hero, this is a key partnership as it finally marks a move towards the premium segment. Largely, 90% of their sales still comes from the lower CC and commuter segment and its trying to have a larger impact in premium space. The company also relaunched the New Karizma, which could help margin growth.
Royal Enfield’s Premium Play
Royal Enfield's presence in the 350-CC and above space is well known with the Classic, Bullet and Meteor. With now four bikes in the 650-CC space, and having two - Interceptor and Continental GT - since 2019, the Siddharth Lal run company has established itself as the dominant player in this segment.
However, currently, the focus on 400-CC doesn't seem to be paying off. The response to the new Himalayan 450 has been soft but this might be reinvigorated by recently launched Guerrilla 450, built on the same platform but having different riding characteristics.
TVS has largely been absent in the 400-CC space and the Apache 310 hasn’t seen an upgrade since a while. While the company has planned a launch in petrol variant in the second quarter of this fiscal.
Norton’s Target Segment Still Unclear
With Norton, TVS will be looking to create products in the premium space and target legacy brand-conscious enthusiasts, a segment that has largely eluded it. Moreover, it seems that with as many as six planned launches, the company will look to create products for different riding needs.
TVS acquired the brand back in April 2020 for 16 million pounds but the company was debt laden at that time. While the current plans of launches next year looks comprehensive, this would need significant effort with dealerships, branding etc.
Norton has bikes like the Commando which is a recognised brand having a 960-CC engine. Similarly, the V4CR as a 1200-CC engine. Despite lack of clarity on the relaunch, the company has said the segment will be more affordable. This could translate to taking a leaf out of Triumph and Harley by bringing comparatively lower powered bikes for the Indian market.
Brokerages View
While largely positive on the fundamentals of the company, brokerage held mixed views due to valuations.
Jefferies maintained 'buy' and increased its target price to Rs 3,000 per share from Rs 2,525 apiece earlier. The company should be a key beneficiary of two-wheeler demand revival in domestic and export markets, it said. It also expects earnings per share to more than double between FY24-27.
Emkay downgraded the stock from 'buy' to 'add' rating on valuation concerns, while increasing target price to Rs 2,600 per share from Rs 2,250 apiece earlier. Recent stock price run-up leaves limited upside, the brokerage said. It expects the company to continue outperforming the industry.
Citi maintained a 'sell' call with a target price of Rs 1,600 per share from Rs 1,550 apiece earlier. They see competition in electric vehicles escalating further and could result in adverse pricing environment. Valuations stay elevated. Citi continues to value at 29 times FY25 P/E.
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