It is not often that one comes across a six decade old vibrant business association between a principal and a dealer, continuing to grow at an impressive pace and creating a niche place for the products and the concerned players in the market arena; and when you decipher the principal as Indian multinational giant and CV leader Tata Motors and the high profile dealer as VST Motors, the surprise element ebbs, leading to the ‘naturally so’ logical deduction. The VST group comprising VST Motors and other group companies clocked a turnover of Rs.3000 crores for the last fiscal and plans to get to break into the elite club of Rs.10,000 crores annual turnover, in about 6 years – going by the track record, the professional set-up and proactive approach to varied business verticals, the target seems a sitting duck, gettable even within a shorter period than envisaged.
“VST Motors was started in Chennai during the year 1949 by my great- grandfather Mr.V.S. Thiruvengadasamy Mudaliyar – and hence the name of the group beginning with acronym VST. He was also fondly called as ‘Gove” by many of his peer group at that time and hence the name of finance arm of the group as Gove investments” reminisces Mr.V.S. Arun, Managing Director, VST Motors Ltd when we meet him at the head office for a tête-à-tête to get to know more about the company’s growth story, operational details and the strategies for the future. The H.O. operates from ‘Gove building’ and the same has become a landmark of sorts with its historic architectural exterior and standing out majestically in the busy Anna salai, Chennai; it houses admin functions apart from a tastefully laid out showroom for Tata cars. The office layout starting from the carpeted wooden staircase to the expansive rooms with high ceiling and mahogany furnishings amidst the modern day office equipment reflects the ethos of the organisation-a seamless fusion of the past with the present. “VST group is a closely held family run business and I am a fourth generation family member running the organisation along with my cousins; while I take charge of certain franchises in VST Motors Ltd, family members are associated with other franchises and management in the verticals and companies. We leave the operational details to the professional team headed by business heads/CEOs and guide the team in the direction in which we see the growth possibilities exist. VST group inclusive of all employees is 3000 strong and the reliance, bonding and long years of close working association for a common business cause has been mutual. The team work has enabled VST Motors to achieve the status of ‘one of well recognised brands’ in the automotive dealership domain; and the well nurtured association running to several decades is also with the leading brands of automotive manufacturers and loyal generation of customers” says an effusive Mr. Arun.
Genesis of the VST group dates back to 1911 when the VST & Sons started their operations in Bangalore, trading in petrol and kerosene; manufacturing operations and passenger car dealerships were added on subsequently – it was indeed a proud moment for the company that celebrated its centenary year in 2011. VST group is the umbrella organisation with operations spreading out in auto dealerships (cars&CVs), manufacturing, construction, parts distribution and finance operations. VST Motors is the sister company started in Chennai during 1949 that has grown to become one of the largest contributors to the group’s turnover. Manufacturing arm is VST Tillers Tractors Ltd involved in the production of single cylinder diesel engine, power tillers and tractors with a joint venture with Mitsubhishi group, Japan – has 3 plants in Karnataka (B’lore, Hosur& Mysore) and the new Mysore unit planned to double the capacity is expected to go on stream shortly. The contribution to the top and bottom lines from the operations is again significant.
VST Motors group, a part of VST Umbrella group deals with auto dealership (VST Motors Ltd), auto parts (VST Auto Parts Pvt Ltd), and the finance operations(Gove Investments & Finance Company). Gove finance and investments has been in operation for 30 yrs to provide auto finance and loan options to their customers. Under VST auto parts, they deal with aftermarket parts – essentially they buy the parts from Mahindra& Mahindra and Tata and supply to the retailers. Besides the same, they also deal with distribution of shell lubricants in T.N & K’taka.
VST Motors Ltd (referred as VST Motors) the flagship company has two business verticals one for commercial vehicles (CV) and the other for passenger cars. Car dealership started from Studebaker and Austin brands in the early 1950; and with progress of time, others added on like Hindustan Motors, Tata, M&M and the new generation car brands. Some of the cars/motorcycle dealerships in the fold include Tata and M&M(B’lore & Chennai), Ford(B’lore& Chennai), Bajaj(two wheelers, B’lore), Honda(Motorbikes, B’lore), and Jaguar& Land Rover (Chennai& B’lore) and VW (B’lore)
Mr. Arun says “It is the long years of Tata-CV dealership association and the impressive business performance thereof that has made vertical the cornerstone of the VST Motors–CV business accounting for about 80% of the VST Motors’ Rs.1500 crores annual turnover. CV dealership is a high turnover small margin business; yes, it gives the top line a significant boost. We have sold annually about 18,000 vehicles, SCV inclusive during past few years. Performance in the SCV segment has been outstanding for us with sales between 12,000 and 14,000 SCV per annum and more creditably occupying the No.1 position in all India sales for the last 6 years in the running. Also of importance is, this has given us the market reach in T.N, traditionally a stronghold of Ashok Leyland” points out Mr. Arun.
VST Motors’ strength lies in its large network of all 3S variations in T.N. It covers the entire state thro’ its sales/service outlets in all the major districts; and some of the major CV sales and service facilities that have come up recently in 2 acre plot include the ones at Sankagiri and Trichy. The expansion is continuous both based on Tata’s requirements and their own market observations. Under the CV vertical, 4 distinct business groups operate viz., in M&HCV, ICV, SCV and Bus categories. Many of the sales & service outlets are companies under the group and operate as profit centres. This ensures that the performance parameters of the individual centre can be clearly identified and there are no cross effects of a non-performing division on a profitable facility. This enables the management to strengthen the weaker division in the appropriate functional areas and bring them on to the good performance platform.
How has been the principal’s support to the dealer in churning out this impressive performance? “Being categorised as a big dealer, our association with Tata is continuous both thro’ formal and informal meetings. Tata takes the opinion of dealers like us during pre and post launch of new products. Training is extended both at our workshops and in Tata factories. Unlike in the car business, we deal exclusively with Tata CV and envisage no change in this position despite the entry of many players in the recent times. Tata and Leyland have well knit dealer service networks almost every 100 km and thro’ these, service and parts are made available to even a small time operator. M&HCV unlike the SCV is a knowledge driven segment owing loyalty to the brands. Loyalty factor besides being based on the product quality and experience is also linked intrinsically to the comfort feeling of ready availability of service and parts all over India. This can not be matched by the new entrants and it would take quite some time for them to reach this level. However in the niche segments like the mining, haulage and ODC transport they can definitely do well ; but when it comes to the volume based cargo transport, the market dominance by Tata and Leyland will continue for a long time to come. Tata is aware of the emerging competition and challenges/pressures thereof on both them and the dealers; and responding by introducing various models to meet the customer expectations and application needs. They have their own R&D to keep up pace with the international standards and we do not see the leadership status to change at least for another 10 yrs. Also India is a price sensitive market and Tata at this juncture has all the advantages of an early starter to counter the new market entrants. More importantly with our 6 decade long association, we aim to further strengthen our association with Tata and want to be ready on all fronts to catch up with the expected market boom few years down the line ” summarises Mr. Arun.
In the M&HCV segment, ranking of VST Motors vis-à-vis other all India dealers should be in the top narrow percentage band. As per Mr. Arun, it would not be fair to compare their sales performance with other dealers because VST motors operates only in T.N; and wherein the market size for Tata could be around only 20% whilst another dealer could be operating in a market that could be as high as 90% for Tata. However on various other parameters including customer satisfaction index, highest growth rate, customer support, most service outlets etc, VST has hit the 1st position many times. As regards the current downturn in the CV market, he opines that the sales have taken a beating up to 35%; even if the sales in the next half of the fiscal matches the figures of the first 4-6 months, dealers would be more than happy. ”All this means, we see no growth for the current fiscal and expect no major change of demand pattern in the next 6 months. My bet for business potential and growth in the short term would be on SCV and Bus segment. Pre-owned CV market is another area we are looking at closely and we are present at the current juncture in a small way. Yes, this segment is currently dominated by unorganised sector; and when it takes off, bound to attract organised players and hence our keen interest. Despite the business gloom today, we are bullish about the long range demand. From our long experience we can say that the auto market in India in the last 50-60 yrs has seen only limited growth pace ; but this is bound to change and for the next 30-40 yrs and we can expect good times for the auto sector in general and CV in particular” indicates Mr. Arun.
The company in its values and belief systems strives to create a healthy working environment and give back to the community; the recycling efforts in water usage and disposal of waste oil are few amongst many practices at the workshops. The group has been running a girls school in B’lore since pre-independence time for the lower strata of society to impart education in the Indian way. The facilities have been expanded recently to cover the central board curriculum. Also the group runs several trusts to help the employee families in higher education. ‘In today’s scenario, every organisation needs to give back to the society in its own way and we are carrying out the above as part of our corporate social responsibility” says Mr. Arun.
Commenting on the growth plan chartered he adds” As a group we have identified 3 to 4 segments; some projects are in the preliminary stage while others in the advanced level. We will continue to monitor the market closely for growth opportunities and make an entry at the right time. We will continue to expand the dealerships and look for new thrust areas like logistics & warehousing, services segment, real estate to triple the annual turnover to Rs.10,000 crores in the next 6 years. In the group management we are all in our 30s and 40s willing to take the plunge and take the group to the next level. As regards auto business, we know that the market is going to get competitive and margins squeezed out with the entry of many players. We are getting prepared for the scenario of ‘why to a certain dealer?’ ; and aware that the justification to the same thro’ demonstrable facts and figures is only going to keep the players like us stay ahead in the race.” points out a confident Mr. Arun. Well, going by their large base of satisfied and loyal customers, organised and systemic approach of the enthusiastic and young team at the helm and committed employees treated like family members, we should be witnessing soon VST group’s wider and significant roles in the Indian industrial canvas.