BW Businessworld

Would Like To Have Our Own Manufacturing Presence: Volvo Auto India

The company is building plants all over Asia and in the US and is looking forward to have an industrial footprint in India

Volvo Auto India has recently announced that it will start vehicle assembly operations this year by leveraging on the facility owned by Volvo Group near Bangalore. 

The company's MD Tom Von Bonsdorff, while interacting with BW Businessworld, has revealed that setting up a completely knocked down (CKD) facility, under a license agreement, is like taking baby steps towards running its own manufacturing facility in the future. Edited excerpts:

Do you expect goods and services tax (GST) will result in an unprecedented boom in the luxury car market?

To be very honest with you, I don’t know whether ‘boom’ is the right term when it comes to luxury car sales. But I definitely see a steady increase in sales which is good for the entire industry. That means we have to ensure that our customers have access to our sales facilities and the market is prepared for this. I think GST is a positive move towards making luxury cars a bit more affordable.

You are currently importing your product lines from Sweden and Belgium. Going forward, are you open to the idea of shipping in cars from China?

Yes, why not? At present, we have factories in Sweden, Belgium, China, and Malaysia and are building a new one in the US. We are building an assembly facility in India at Bangalore. There will be cars coming from all of these different plants (to India). It depends on what models we are selling worldwide and what we are retailing in the domestic market. We have a global supply and have been importing cars from Europe (Sweden and Belgium) and may consider bring some models from the US and China in the near term.

Currently, you are doing CKD operations by utilizing a facility run by Volvo AB. Going forward, would you consider setting up a Greenfield manufacturing facility on your own? If yes, can you put a timeline for the same?

We have taken one step by setting up a CKD production facility at Bangalore for the XC90 premium SUV. I am sure there will be many more steps taken in the coming years. For now, we are happy that we have been able to take the initial steps towards full-fledged manufacturing. We have been building plants all over Asia and in the US and are looking forward to have an industrial footprint in India. It will be interesting to see how the luxury car market evolves over the next 10-15 years.

As GST rates on hybrid vehicles have gone up, would you be interested in bringing those products in the future? If yes, will you be assembling them here as well?

I am a bit disappointed by the government’s decision to impose a higher GST on hybrid cars. I do hope that the government would reconsider its decision to have a 43 per cent tax on such vehicles and lower it. That will make it possible to have more consumers to afford hybrid cars. For the next few years, Hybrid Powertrain is a good intermediate solution before transitioning to full-electric ones. 

With our XC90 hybrid (launched in September 2016), you can drive up to 40kms on pure electricity and the vehicle behaves almost like an electric car. We have sold 50 units of this model until now and will continue to launch plug-in-hybrids variants of all the existing models. We are also keen to bring in our all-electric car in the next couple of years. Moreover, building a hybrid vehicle locally is very much technically feasible. It depends on what kind of assembly facilities do we have here. But we have not taken any call on that.

Do you stand by your medium term objective of garnering 10 per cent market share in the luxury car segment by 2020?

We are quite confident that we will sell 2,000 cars this year and will register positive growth for the next few years. We have a vision of achieving a 10 per cent market share in the luxury car market by 2020. So if the overall market size (of luxury cars) is 50,000 units per annum, we will be selling 5,000 units in the domestic market. However, if the market size is 60,000 per annum, then we could sell 6,000 units. The reason for expecting a 10 per cent segment share and not absolute numbers is because we can’t predict what will be the overall size of the passenger vehicle market and how much will the premium segment account for in three years’ time.

Are you considering launching any models below V40 in the Indian market?

Globally, V40 is our smallest car and that remains the case with India too. I don’t think we will be getting any cars cheaper than that. The safety features that our products are equipped which adds up to some basic costs as well. We have just launched the V90 Cross Country and are looking forward to bring in XC40 SUV next year. Apart from product launches, we will be ramping up our distribution network to 25 sales outlets by the end of the year.

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