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Two-wheeler maker LML expects to re-enter markets in western and eastern parts of the country later this year, though the large southern market will see their scooters and bikes only by 2013.
The Kanpur-based company's network is at present limited to the northern markets, such as Haryana, Western Uttar Pradesh, Punjab, Delhi and Jammu and Kashmir.
“The next step is to have a footprint pan-India, except in the South. Dealers have to be profitable through sales consistency, which is why we are taking it slow. We'll be inaugurating our new Ahmedabad dealership in a few days. Then, we will start appointing more dealerships in the western States of Rajasthan, Madhya Pradesh, Gujarat and Maharashtra from November. These dealers would be active by April-May, 2012,” Mr P.S. Chowdhury, LML's Head of Sales and Marketing, told Business Line .
On hold for now
However, the company has kept its plans to enter the southern markets of Karnataka, Tamil Nadu, Andhra Pradesh and Kerala on hold till 2013.
“LML has traditionally been stronger in the Hindi belt, so that's the first priority. We hope to enter South India by 2013. This is because there are many languages in the region, which makes marketing very expensive. We are on a revival path and do not have huge funds to spend on communication activities,” he said.Limited capacity
Supply-side constraints have forced LML to adopt such a phased growth strategy — production is currently limited to 7,000 units a year. Increasing sales from the northern and western markets will give the company funds and confidence to invest in capacity by re-activating its second plant in Kanpur.
LML, one of the oldest two-wheeler makers in the country, had become dormant for a few years due to financial and labour troubles. It had stopped nationwide sales in 2006 as it began restructuring operations, but restarted business with export sales from 2007.
The intention to expand the sales network follows the Mr Deepak Singhania-led company's plans to launch four products this fiscal. While it plans to re-enter the mass-biking segment with the Freedom range by end-2011, a 200cc geared scooter is set to be launched in a few months, followed by a gearless one.
After approaching the Board for Industrial and Financial Reconstruction in 2006, the BSE-listed company, as part of revival plans, had stopped production at one of its two plants, besides cutting down manpower drastically from the earlier 5,500 employees. LML, currently the largest scooter exporter in the country, had invested significantly in product research and development.
“At present, we have 650-700 employees in the company. Costs had to be significantly reduced as part of the revival process, which is not yet over. We chose to restart with exports as contract-manufacturing was more profitable since there was no marketing expenditure. But it was more risky as well — Egypt was one of our biggest markets, before the political situation worsened,” Mr Chowdhury said, adding that the company now wants to have an equal focus on the domestic market.
Points.
2006 – February-March – Strike at plant and lockout
September – Approached BIFR
2007 – Restarted with exports
2008 – Domestic sales relaunched
2009 – Launched 4 stroke engines and BS III 2 stroke engine
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