Management Perspectives

According to a World Health Organisation (WHO) Study in 2018, of 4,300+ cities across 108 countries, 14 of the 20 most polluted were in India. Air pollution from burning fossil fuels costs India an estimated R10.7 lakh-crore ($150 billion) annually, which amounts to 5.4 per cent of the country’s GDP, the third highest worldwide. In the automobile sector, 32 per cent of air pollutants are emitted by bikes and scooters, followed by diesel-run trucks (28 per cent) and private cars (22 per cent). A 2016 research conducted by People Research on India’s Consumer Economy (PRICE) indicated that one in three households in India owned a two-wheeler. The proportion of car-owning households was 11 per cent of the total population compared to 36 per cent owning a two-wheeler and 58 per cent owning a bicycle. In 2017, Delhi (67.07 lakh), Bangalore (50 lakh), Chennai (36.45 lakh), Hyderabad (36.24 lakh), Pune (24.96 lakh) and Mumbai (17.71 lakh) were the top 6 cities with maximum two-wheelers in the country. By 2019, two-wheeler sales in India reached an all-time high sale of 2.1 crore units. This was almost double the 2011 sales, when 1.17 crore two-wheeler units were sold in India.

It is no surprise then that two-wheelers have been the despair of environmentalists since decades. At the turn of the last century, two-wheelers running on two-stroke engines constituted 60 per cent of the vehicular population in India. The two countries that faced major environmental problems from two-wheeler emissions were India and Taiwan. Back then, in 2000, Taiwan had the strictest emission norms in the world.

Contrastingly, the Indian journey towards emission-related norms had just begun. The first-ever emission norms in India were introduced in 1991 for petrol and 1992 for diesel vehicles. But the major turning point came in 2003, when the National Auto Fuel Policy was announced. The policy created guidelines for auto-fuels, reduction of pollution from older vehicles, and R&D for air quality data creation and health administration. Better known as the Bharat Stage Emission norms (inspired by the Euro Emission Norms), they have become progressively stringent.

Since 2010, compliance with Bharat Stage (BS) III was mandatory across India, while Bharat IV was enforced in 13 major cities. From 2017, BS IV was mandatory across India, and BS VI from April 1, 2020.

In 1999-2000, TVS-Suzuki was among the first companies to launch four-stroke scooters through their Spectra model.

Though not successful due to higher cost and drop in acceleration, it was indicative of the Company’s transition towards more environment friendly products. This extended to the motorcycle segments with the introduction of TVS Victor, the first four-stroke motorcycle, in 2001. By 2003 (after parting ways with Suzuki in 2001), 80 per cent of TVS Motor Company vehicles were powered by fourstroke engines, through an investment of R100 crore. While the two-stroke technology offered better performance and easy maintenance, the four-stroke offered better fuel-efficiency. With emission norms kicking in by April 2000, four-stroke became the order of the day. Though the two-stroke motorcycles could also meet the norm with the addition of a catalytic convertor, it made the vehicle costly and the solution myopic.

In a price-conscious economy like India, the shift towards ‘green’ vehicles would be slow unless spurred by legislations. Most automobile companies would commercialise green technologies only when the change gains momentum, most probably through alterations in law, and achieve scale required for long-term commercial viability. The vehicle scrappage related proposals in the recent Union Budget are steps in that direction.

Electric vehicles and clean technology
Electric motorcycles can have a significant and positive impact on air pollution in the country given that motorcycles account for majority of two-wheeler sales in India. Back in 2008, TVS Motor Company had introduced its popular Scooty in an electric version. However, over the subsequent decade, auto-manufacturers focused on dual-fuel technologies than batterypowered alternatives because the necessary support infrastructure such as recharge stations were not available in the last decade. This led to limited demand, low economies of scale, and higher manufacturing costs and sales price. In general, ‘green’ products could become popular when they are made available at prices and with features of existing non-green products.

While the larger commitment to environmental issues does exist among the Indian population, especially the educated younger generation, the willingness to pay a higher differential price for a green product is still limited. For that reason, in recent years, central and state governments have been offering several tax rebates and benefits that lead to a reduction in the total cost of the vehicle.

In recent years, TVS Motor Company has invested in R&D for production of electric vehicles. iQube, an electric two-wheeler vehicle with zero tailpipe emissions was launched by the Company during 2019-20. It also developed Apache 4V 200 which can run on 100 per cent ethanol (E100), a carbon neutral biofuel. The Company also attempted to reduce vehicle exhaust emissions up to 70 per cent across its products by adopting advanced technologies for weight reduction, friction reduction and optimized fuelling to meet BS VI norms. As part of its commitment to clean technology mechanism, at product development stage itself estimation of CO2 emissions from cradle to grave was done to track and monitor emissions during the entire product life cycle.

The Company has also tried to gain a stronger foothold in the ecosystem through inorganic investments. Among two-wheeler makers, TVS Motor has been leading in backing start-ups. Between 2017 and 2020, through its Singapore subsidiary, it took minority stakes in start-ups across domains — electric vehicles (EVs), artificial intelligence (AI), the Internet of Things. In December 2017, TVS Motor invested around $1 million in Ultraviolette Automotive, an electric mobility solutions firm, for a 14.8 per cent stake; and further raised its stake in August 2018 by investing another $1 million.

In August 2017, the company announced acquisition of 24 per cent in RentOnGo, a Bengaluru-based start-up operated by Condivision Solutions and an online marketplace for renting of motorcycles. All these investments were in alignment with the Company’s increasing thrust on EVs, clean technology and urban mobility solutions.

Reuse, recycle, recover
According to the Company’s Business Responsibility Report 2020, more than 90 per cent of its products are reusable, recyclable, and recoverable (cumulative). The Company also restricts usage of hazardous chemicals in the components through an internal standard so that during recycling, hazardous substances would not enter and cause air, water, and soil pollution. For this reason, the batteries are marked with the recycling symbol so that at the end-of-life, these batteries would reach recyclers through the Company’s dealers and channel partners. All these processes stem from the Company’s commitment to match international standards of recyclability, especially those in countries like Japan and Germany that have laws on recyclability.

Sharing with me his perspective on integrating environmental concerns with business strategy, Venu Srinivasan, Chairman and Managing Director, TVS Motor Company, said, “Environment is very critical because society is going to regulate you tighter and tighter. So, a company that wants to survive in the long-term will always have these as priorities.” He gave the example of Honda that decided to go for four-stroke engines that were more efficient, much before Yamaha and Suzuki, primarily in the interest of society. “Ultimately there was much more response to Honda and it also became the largest motorcycle seller. Suzuki and Yamaha changed to four-stroke much later. The same applies to pollution within and outside your factory, safety in your factory, and environmental degradation. These are critical parameters.”

Green factory
Visits to the TVS Motor factory at Hosur (Tamil Nadu) remind me of a national park. The greenery, the freshness in the air, the silence, the sight of rare species of migratory birds in early morning hours, were all unlike sights one would expect at a two-wheeler manufacturing unit. But that was my experience every time I visited their premises. During a conversation, S Devarajan, Senior Vice President at TVS Motor, elaborated how 100 per cent of all water inside the plant was recycled and used for gardening purposes. With the 4R principle of Refuse, Reduce, Recycle & Reuse towards water conservation, the Company reduced specific water consumption between 2015 and 2020 by 20+ per cent.

The TVS Motor factory at Hosur was cooled by the exhaust heat of the generator, and the same exhaust heat was used to pre-heat some of the processes. The use of robotics in the paint operation reduced generation of paint sludge. Painting was even eliminated in eight parts across products resulting in resource conservation and Volatile Organic Compound (VOC) emission reduction. In case of highly popular TVS Motor products like Apache, Jupiter, Star City, and Victor, conversion of metallic parts to recyclable plastics and use of recycled plastics was continuously pursued without affecting performance, durability, and statutory requirements. Interestingly, 76 per cent of the Company’s electricity consumption was from renewable energies. The use of LED lights in all engine assembly lines also reduced power consumption on factory premises by 30 per cent. Thus, visible and consistent efforts were being made to implement and maintain the ‘green-focus’ at all manufacturing plants in Hosur (Tamil Nadu), Mysore (Karnataka), and Nalagarh (Himachal Pradesh).

Value-adding versus non-value adding
During our conversation, K N Radhakrishnan, Director and CEO, TVS Motor Company, shared an interesting perspective on waste management. He said, “I always talk about the value-adding ratio. What is the value-adding ratio in a banana? It is 95 per cent. Other than the skin, you can consume everything else. In an apple it is about 98 per cent. But if you look at any organisation, the value-adding to non-value adding ratio is about 5-10 per cent. The rest are all wastages. The challenge for any leader in the market is to reduce this non-value adding ratio.” And how does one identify what is value-adding? “Whatever the customer is ready to pay for is value-adding.”

To live up to this vision, TVS Motor’s R&D facility employed over 600 engineers for innovations in the development and upgradation of technologies that reduced emissions, improved fuel-efficiency, and enhanced customer value in terms of comfort and safety. Motorcycles compatible with E85 fuel (15 per cent gasoline and 85 per cent ethanol blended fuel) have been developed through R&D to meet future needs. With the help of Electronic Fuel Injection (EFI) technology, it also optimised various performance parameters to achieve an increase in fuel economy up to 10 per cent across products. This has led to an annual reduction of 30,000 tonnes carbon dioxide in 2019-20. During the same year 13 lakh liters of engine oil and 29.2 lakh liters of gasoline were conserved through newly developed friction reduction oils in scooters and by extending oil drain intervals from 3,000 km to 6,000 km. In the decade between 2011 and 2020, 68 per cent reduction in GHG Emissions Intensity was recorded by the Company as per the GHG Protocol. During the same decade, the Company’s annual R&D spend had quadrupled to over R305 crore (~1.5 per cent of revenue).

In our conversation, S G Murali, the then CFO at TVS Motor Company, observed that many times it is tempting for companies to cut R&D investments. But these investments are permanent and give returns over a period. Without them, the company would not be able to launch innovative features and build its brand. “While every company goes through turbulent times, corporate life is immortal. Resorting to short-term measures can cause permanent damage in the long-term, both for the company and its shareholders,” he shared.

Not ‘planning’ planned obsolescence Many times, customers scrap vehicles because of non-availability of spare parts. This, in most cases, is intentional. The case of planned obsolescence is increasingly visible in manufacturing and service companies across the world, where products are made in a way that they last only for certain number of years. The cell phone industry is the biggest culprit in the planned obsolescence strategy. A rough estimate of cell phone usage in the world’s three most populous countries—China, India, and USA indicated a cumulative e-waste of 8,000 crore cell phones by 2100. In the automobile sector, frequent changes in designs, use of non-durable material, and termination of spare parts supply are means to achieve planned obsolescence.

At TVS Motor Company, the focus on increasing volumes was not achieved through non-availability of spare parts. Spare parts are obtainable even beyond the stipulated time of seven years, in fact, even beyond the life of the vehicle. As a result, vehicles need not be scrapped for non-availability of spare parts. This tradition of extended use and reuse has been native to Indian way of life for centuries, unlike the ‘use and throw’ culture of many developed and resource-abundant countries. However, in the contemporary times of resource shortages, massive urban waste accumulation and its direct impact on climate change, it is necessary for companies to embrace and perpetuate this approach for sustainable development and reduction in non-degradable waste and scrap. Increase in corporate bottom-lines at the cost of the natural environment is not sustainable.

Lessons from global giants and from company history
Sharing his vision for the future, Radhakrishnan gave examples of automobile giants like Honda and Toyota that considered the customers as their best salesmen. “You need to improve customer loyalty; the same customer coming back to you again and again. That loyalty can be gained only by giving the customer best-in-class sales experience, and much more than that is service experience.” He narrated the after-sales service example of Maruti and Toyota. They kind of ‘owned the car’ much more than the customer owned it. This was exhibited through consistent followup with customers for regular servicing. Sales representatives would remind customers with phone calls, “Next week is your due-date for service. When are you coming?” If a customer forgets, there would be a reminder call. If the customer forgets even after three or four reminders, the company representatives would visit the customer to understand their problem and be of help. Radhakrishnan believed that such an approach impressed upon customers the company’s commitment to their welfare and optimal fulfilment of their mobility needs.

“Automatically you feel that the next time you buy a car; you would go back to them only. My aspiration is that TVS should become like this. There should be a set of loyal customers which keep growing and growing,” he shared. In December 2020, TVS Motor was among the top 3 two-wheeler manufacturers of India with a market share of ~15 per cent and exporting vehicles to 60+ countries.

Radhakrishnan’s vision was essentially a reflection of the age-old TVS culture of customer service. In pre-independence India, sometime in the 1940s, there was a practice at TVS that every customer of cars sold through TVS dealership received a post-card with a pre-paid reply form attached within 30 days of the sale. The main objective was to understand customer’s satisfaction with the car’s working. If a car did not come for service within the scheduled time, a TVS salesman was sent to the customer to pick up the car. If the customer did not get the serviced car back in time, (s)he was given a spare car to use till the service was completed.

One legendary incident is about an international customer who had a problem with the car purchased from TVS. In response, the Company sent its representatives to the customer’s doorstep and serviced the car. Such quality service from an Indian company in the 1940s was outstanding, even by international standards. The underlying value for delivering this was the founder’s belief that ‘Customer is God’. In the current decade of action, when individuals and institutions, corporations and countries would be striving hard to work towards achieving the United Nations’ Sustainable Development Goals 2030, the company and the auto industry would do well by consistently nurturing eco dynamism and creating win-win outcomes through research, innovation, and collaborations for their customers, the industry, and the planet.