Volvo looks to grow aggressively but sustainably in India
Chinese-owned Swedish car manufacturer Volvo is looking at an agressive growth strategy in India. The company has now joined other car manufacturers like Audi, BMW, Mercedes-Benz and Tata owned Jaguar Land Rover in the persuit of having a bigger piece of the Indian luxury car market pie. The brand aims to grow its market share to 15 per cent of India's luxury car market by the year 2020. Volvo's combination for success is Chinese parent Geely's know-how of doing business in emerging markets, along with the quality, luxury, safety and assurance of a European car maker.
With dropping vehicles sales in Europe, Volvo is looking to grow in emerging markets, investing on a sustainable future. For the first time the company will move out of Europe, setting up a manufacturing plant in China, catering to the company's rapid growth there.
Volvo came into India is the year 2007, but the company began its aggressive expansion only in 2011. Since then, despite having sales figures of less than 1000 units a year, Volvo has been the fastest growing brand in the Indian luxury car market.
The company recently launched its V40 Cross Country hatchback in India, marking the brands entry into the fast growing compact luxury segment.
These are the edited excerpts from an interview of Tomas Ernberg, Managing Director of Volvo Auto India, exclusively with wheelsunplugged.com.
What kind of investments is Volvo looking at in India over the next few years?
I cannot talk about numbers, but since last year we have doubled the size of our office and doubled our staff. We will continue to employee more people and we also continue to invest a lot on training. One of the medium term goals now is to work on a Volvo university, a school where people actually go to learn about Volvo.
We are focusing so much on training the technicians, and so far we have had about 260 days of training. We are working on an 'Hour-Stop' concept. Customers come in and we have four technicians working on the car at the same time and the car will be out in an hour. Lots of developments going into the workshop infrastructure, we're talking of lean workshops. They won't be very big, a maximum of two lifts, but its going to be all comuputerised. On that front, worldwide, Volvo will be the number one in customer service.
About the European market, how is Volvo performing there?
Europe is going through a financial crisis and Volvo is not doing so well there. What we have done as a company is invested in emerging markets like China and India.
In China we will open up a full fledged manufacturing unit.We're testing the cars now, so that should be up an running in about a month. The plant will have a capacity of 100,000 units a year, but that would be only for the Chinese market.
Is there a fear of the quality of Volvo cars dropping when manufactured outside Europe?
That's one of the things that has been key in opening up the factory in China. We have to make sure that the cars leaving the factory are of Volvo quality, otherwise we would kill our reputation in one or two years. That has been extremely important and Volvo would never ever compromise on its quality.
How do you compare the growth of the luxury car market in India with China?
For the moment I would say that in India the luxury market and Volvo cars are actually growing faster than China. In China we have a much higher absolute volume, but in terms of growth India is faster.
Today China represents the biggest car market in the world with 17 – 18 million cars sold every year. India sees sales of around 2.5 million cars which is expected to grow to about 5 million by 2020. When that happens India will become the third or the fourth largest car industry in the world, and now is the right time to grow here.
What is your take on the Indo-EU FTA?
India is today discussing with the EU for the Free trade agreement, part of which includes automobiles. I don't see there being an agreement this year. Maybe after the elections, perhaps in 2014, there will be an agreement signed. It will go step by step, going from 60% to 10% import duties will take say ten years.
Is safety one of the top priority of Indian car buyers?
If you generalise you would see that safety is not their (Indian buyers) top priority when buying a car. It would be luxury and the name on the badge. But through the right education, and focus groups, we can change that. It will happen, but it will take time for India to look more at safety and when that happens, a Volvo is definitely the right car.
How do you plan to compete with the German manufacturers in India?
They have grown very quickly, and they're ahead of us by miles. But we're trying to focus on the Volvo way. We are opening up new dealerships, but we're not doing that in a years time time. We're going to take our time, as long term is more important than the short term.
(You want to have 40 dealerships in India by 2020) That is what the Germans are doing this year, from 26 to 40 dealerships, and they have around seven months left. How can you do it? What about the quality? But I don't know, they have their own way.
Will you set up dealerships in Tier 2 cities?
What we would try to do is, with the current dealers we have - after Bangalore where should we go? Maybe Mangalore? So we'll start looking at the same owners, because Bangalore would be very small market for somebody to invest in a showroom as there would be very little sales in the beginning.
For this year we have two more showrooms Vizag and Kolkatta, after that we will be looking at Luckhnow and Jaipur, but no decisions have been made on that yet.
Will the V40 Cross Country be Volvo's best selling car in India? And who is the competition?
No, not for the moment. We're looking at 15 -20% share for the V40 Cross Country. The largest selling cars will be the S60 and the XC60. But i may be wrong because we have got fantastic reviews from customers.
Size wise the B class is more comparable to the V40 Cross Country, but still its very different in pricing, around 24 lakhs. If you add the options we have on the V40 on the B class, it would be priced equally or a little more than the V40. Price wise we are right and we have a completely different strategy. Maybe I am completely wrong and they (people) will want a basic 24 lakh V40 Cross Country.
Will there be other variants of the V40 Cross Country in India?
For the moment there are no plans to bring other variants. We're going with one engine one variant strategy. We are seeing that India is becoming more and more a diesel market as well and with the new technology on the diesels, they are very well high performance.
What is Volvo's vision for the future?
The vision 2020 is that you sit in a Volvo car and we promise you won't get seriously injured or die, no other car manufacturer can claim this.