Tom von Bonsdorff has been the managing director of Volvo Auto India since June 2015, and today is his last day in that role. A Volvo veteran—having spent over 17 years with the company—von Bonsdorff was responsible for the steering committee that was instrumental in the commencement of the local assembly unit of Volvo Cars in Bengaluru (operations will start by the end of the year). During his tenure, the company grew over 32%, though on a low base, and brought to India multiple innovations—the country’s first luxury plug-in hybrid SUV and radar-based safety technology. He believes that even as the country has set an ambitious target of selling only electric vehicles by 2030, the practical way to achieve that target is via hybrid cars. In an interview with FE’s Vikram Chaudhary, he adds that the government must provide active support to hybrid cars until there is a proper infrastructure in place for automotive electrification. Excerpts:
What have been the high points of your career in India?
When I joined Volvo Auto India in June 2015, the market held great promise—being one of the fastest growing markets for Volvo. We have been selling cars in India as Completely Built Units (CBU) for many years, but this year in May we announced we will start local assembly operations. I was responsible for the steering committee that was instrumental in the commencement of the local assembly unit in Bengaluru. So, obviously, the highest point for me was when this initiative came to fruition and we did the formal announcement. At the same time, we strengthened our core values of providing safety, comfort and luxury to the customer. Another high was taking the segment share to 5%.
At what rate has Volvo grown over the past three years?
Volvo Cars grew by 32% over the last two years and we are on track to achieve another 25% growth in 2017.
In 2014, we sold 1,202 units. The volumes grew to 1,423 units in 2015 and then to 1,600 units in 2016. We expect to sell about 2,000 cars by the end of the current calendar year. We are hopeful of capturing 10% of the segment share—within the Indian luxury car market—by 2020.
One of the reasons for sales growth was that we brought some exciting cars to India in the past couple of years. For example, the introduction of India’s first luxury plug-in hybrid SUV—the XC90 T8 Excellence—was a proud moment for us. We also became the first company to have introduced radar-based safety technology in the India automobile industry.
Is the Indian market tough to navigate?
The Indian market is diverse, with demographic and psychographic profiles of customers changing every 80-100 km. An emerging luxury car market like this needs constant training and skill development at all levels—from servicing to marketing to brand-building. The market is yet to mature and government policies are dynamic. It was a bit tough initially, but we have overcome the complexities of the market. Our primary focus so far has been to create awareness, brand equity and consumer engagement for a discerning experience. Now, we are poised to get into the acceleration mode.
How different is the Indian luxury car market compared to major markets globally?
Traditionally, the penetration of luxury car players in the developed markets is between 10-15%, which comes down to about 5% in developing countries. In India, it is below 2%, and has stagnated at around 35,000 units a year for the past three years now. However, affluent customers in India form a staggering number. We were surprised to notice that we sell more cars in top trims than the base models. The potential, therefore, is huge.
Volvo wasn’t directly affected by the Delhi diesel ban since your cars were powered by sub-2000cc engines. Yet how do you look back at the ban and steps like the 10% additional cess on bigger-engined cars?
We, at Volvo, believe that instead of focusing on, say, the size of the car or capacity of engines, the focus should be more on carbon dioxide emissions. As for the 10% additional cess that would affect all big cars, I think there will be a short-term sentimental change in the customers, but once the festive and wedding season begins, it will have little or no impact on customers’ buying behaviour. Globally, Volvo has announced that, 2019 onwards, every car it makes will either be fully electric or hybrid.
Does this mean that all your new launches in India, 2019 onwards, will be either fully electric or hybrid, or will you stick to internal combustion engines for a few more years?
Yes, we have made a commitment that we will be putting in electric motors in every car that gets rolled out of our manufacturing units across all the markets post 2019. The car could be either fully electric or a hybrid version, but every car will have an electric motor. Globally, we have a target of selling a total of 1 million electrified cars by 2025. We are already on course to bring in our first fully electric vehicle to India by 2020. The Indian government has announced that all cars sold in the country, 2030 onwards, will be fully electric.
Does the deadline appear practical? Far more mature markets such as the UK and France have set the deadline as 2040…
The Indian government, I must say, has made a bold resolution to sell only electric vehicles post 2030. I think it is doable. At Volvo, in the coming years, our focus will be more on providing electric or hybrid options to our patrons across all our product lines. In a nutshell, we will be fully ready to embrace the change, and that too well ahead of time. The GST rates don’t differentiate between internal combustion engine cars and hybrids, even though it is argued that the route to fully electric cars is via hybrids… Currently, India doesn’t have the infrastructure to support electric cars. I believe the government must provide active support to at least plug-in hybrid cars until there is a proper infrastructure in place for automotive electrification. Plug-in hybrids are the bridge between internal combustion engine cars and fully electric.