TVS Motor Company surpasses predicted quarterly earnings and aims to locate alternatives for rare-earth elements in India
TVS Motor Company, a leading Indian automobile manufacturer, is making strategic moves to tackle the global shortage of rare-earth magnets (REMs), a critical component in electric vehicle (EV) production.
In the June quarter, TVS Motor's exports, which account for nearly a fourth of the company's overall revenue, grew by an impressive 39%. This growth is partly attributed to the company's shift towards a "richer product mix," with high-margin offerings like high engine capacity bikes and scooters gaining traction.
Amidst the REM shortage, TVS Motor is taking a proactive approach. The company is actively exploring alternative sourcing countries beyond China and focusing on heavy rare earth element-based solutions to reduce dependency on China's dominant supply. Currently, China produces about 90% of the world's rare earth magnets and imposed export curbs in April.
TVS Motor is managing production by relying on existing inventory and local stocks to sustain daily EV manufacturing despite ongoing supply chain constraints caused by China’s export restrictions. In the medium to long term, the company's strategy involves seeking alternative international suppliers, developing technical alternatives based on heavy rare earth elements, and gradually shifting procurement away from China to mitigate geopolitical risk and supply disruptions.
Meanwhile, potential competitors facing similar challenges include Bajaj Auto and Ather Energy. Both companies are scaling back output due to limited magnet supplies from China’s export restrictions. Bajaj Auto has reported significant production halts due to inventory depletion, signaling the intensity of the shortage.
Despite these challenges, TVS Motor's core earnings were higher in the June quarter. The operating EBITDA margin expanded to 12.5%, and the profit for the quarter jumped 34.9% to 7.79 billion rupees ($88.92 million). Revenue from TVS Motor's operations rose 20.4% to 100.81 billion rupees in the June quarter.
TVS Motor's electric vehicle sales increased by 35% in the June quarter, driven by a rising share of premium models, such as the Apache series. The company is also exploring "HRA-free, cerite-based, magnet-free" alternatives and alternate countries for sourcing rare-earth magnets.
Other Indian automobile manufacturers, such as Mahindra and Mahindra and Hyundai India, have also addressed medium-term issues from the export ban. Mahindra is using alternatives such as light rare-earths and ferrites.
In summary, TVS Motor is proactively pursuing diversification of rare-earth magnet supply sources and technological alternatives to sustain and grow its electric vehicle production amid global magnet shortages driven by China's export controls. The company's strategies are designed to ensure daily production and long-term diversification.
The index for TVS Motor's electric vehicle sales showed a 35% increase in the June quarter, reflecting the growing popularity of premium models like the Apache series. Recognizing the global shortage of rare-earth magnets (REMs), TVS Motor is actively pursuing technology-driven solutions, exploring countries other than China for sourcing REMs and developing alternatives based on heavy rare earth elements.
