Interview: Volvo cars aiming for 10 % market share in luxury segment in India by 2020 - The Financial Express

Interview: Volvo cars aiming for 10 % market share in luxury segment in India by 2020

We recently got a chance to talk at length with Tom von Bonsdorff, Managing Director, Volvo Auto India, who gave us an insight into the aggressive push that the Swedish company has planned for India.

By: | Updated: August 21, 2017 2:20 PM

Tom von Bonsdorff, Managing Director, Volvo Auto India

Volvo Auto India has been making a lot of news in the recent past and all of it positive, especially with the announcement to make Volvo cars in India. Beyond becoming a part of the Government's Make In India policy, Volvo has many other aggressive and interesting plans to push its market share and brand recognition up in the Indian market. We recently got a chance to talk at length with Tom von Bonsdorff, Managing Director, Volvo Auto India, who gave us an insight into the aggressive push that the Swedish company has planned for India.

Express Drives: There has been a lot of action happening at Volvo in India, including the announcement of setting up a new plant in the country. So, when was this plan firmed up and what is the idea behind setting up a facility in India?

Tom Von Bonsdorff: As you mentioned, it was in the cards for a long time and finally we are going to setup a plant which is a really happy moment for us because at least for the last decade, the competition has been setting up assembly plants in India. And of course, we follow the competition and assess what is happening in the automotive world and look at different business cases on how we should operate in the country. We have been here since 2007 but the larger volume growth has been present by Volvo for a few years, so, we looked at setting up facilities and looked at scenarios for some years and for different reasons we haven't done it yet. Now felt like a good time to do it as the Indian economy looks very stable now which is a good seven-plus percent in GDP growth year-on-year. Also, we believe the same government party will be in power for the next term which means the policies and decisions will be on a fairly stable level. More importantly is the fact that our sales figures have been on the rise with double digit growth for a few years in a row. We now see our products becoming popular and we are also expanding our dealership network which meant that now is a good time to invest in the market and take that final step for further growth.

Express Drives: Based on what we know about the facility right now, the Volvo XC90 is going to be the first car that will roll out of the plant. By when is that expected?

Tom Von Bonsdorff: The first car is expected to roll out by the end of this year itself which means that the last quarter will witness Volvo cars rolling out of the India facility.

Express Drives: Is there a particular investment capacity or a number of the plant that you have in mind?

Tom Von Bonsdorff: We haven't yet announced any specific number as to how many cars we would be able to produce. What I have earlier stated is that we aim to doubling our segment share in India by 2020. So, we would roughly have a 10 percent segment share by that year which would also depend on what the Indian automotive market is going to be like at that point of time. What we have a capacity plan is that we will meet the aforementioned target of doubling our segment share with our local plant.

Express Drives: Can you tell us what is the sales figure that Volvo Auto India is doing right now and the market share?

Tom Von Bonsdorff: In 2016, Volvo Auto India sold 1,600 cars which was a growth of about 11 percent compared to last year. We would have made a bit more but demonetisation of Rs 500 and Rs 1,000 currency notes in the last months of 2016 made it a challenge to meet the growth we had in 2015. This year we aim to do approximately 25% growth meaning that we will surpass sales of 2,000 cars in 2017. In the coming years, we would want to grow further so that by 2020 we have a sizeable segment share.

Express Drives: You mentioned 10 percent segment share depending on what the volume of the market will be by 2020. But, from sale of over 2,000 cars this year, is there a sales figure you are looking at by 2020.

Tom Von Bonsdorff: The reason I want to speak about this segment particularly is because I don't know what the number is going to be. As all the earlier estimates have proven to be incorrect, it is easier to talk about a segment share and we need some plans to work in the right direction. Right now the luxury segment is about 35,000 cars. If we estimate it to grow to, say, 40,000 cars this year, then I think it could be a fairly okay estimate to have about 50,000 cars in this segment by 2020. If you take 10 percent share of that, which is what we expect our segment share to be, it would translate to about 5,000 cars. That is, of course, playing with the numbers and we don't know what it is going to be, but, for a capacity planning, this would be a number we can estimate.

Express Drives: We know that the XC90 is the first model to roll out of the plant in India, what are the other models that we can see once the plant is operational?

Tom Von Bonsdorff: So far we have only decided on the XC90, but, we will plan on other models when they come. Currently, we can only announce that the XC90 will be the first model to be built in India.

Express Drives: Any other plant details that you can share with us in terms of area and approximately how much employment do you hope to generate because it is in line with the Make-in-India scheme as well.

Tom Von Bonsdorff: The reason why we really wanted to invest in India now is that we see the Government policies are very much into the 'Make-in-India' strategies. And that's the policies that I mostly see are very strongly communicated in a very good way. We want to be in line with the Government's initiatives and it makes the basis for us easier as well as we are now operating in a way in which the Government wants us to operate. So, we are protected by any big changes in regulations or taxations or rules and we want to be in line with the expectations. At this point, we are not sharing any details; however, we will be able to do that at a later stage.

Express Drives: Recently you also introduced the Volvo S60 Polestar and the Polestar brand is known for performance. This also indicates that Volvo comes at par in the performance game with the German competitors. So, what is your expectation from the Polestar brand for the Indian automotive market and what kind of role would you want the performance brand to play?

Tom Von Bonsdorff: When I look at our portfolio, we are known for our SUVs, we also have a new luxury sedan and a hatchback. What we have been missing so far in the Indian market is that niche segment of luxury performance cars. So, we first want to offer a chance for people who want to buy a Volvo and people who want to buy a performance car, which is why the S60 Polestar has been introduced to have our segment complete in all the categories we operate. I think that there is a big demand and a desire for performance cars in India like anywhere else in the world. And I think the S60 Polestar is really a good package for customers in India where you have a car that goes from zero to 100 kmph in 4.7 seconds and has a high-performance capability. At the same time, I also think it’s a car that you can use on as well as of a race track and that's why I felt that we needed the S60 Polestar. In fact, we have had a big demand from our dealers stating that there is a big demand from customers that they want the Polestar brand to come to India. Of course, we would want to fulfil the customers' wish as well and therefore we decided to introduce the S60 Polestar. We have had a good buzz around the product and we hope it to be successful as well.

Express Drives: Is there a number as to how many bookings have you got for the S60 Polestar so far or how many have already been sold?

Tom Von Bonsdorff: I don't have an exact booking number, but, we have only got 30 units for the time being to India. We have a fairly aggressive price on the car but we have to start negotiating with a plan so that we can get more units to India once these are sold. Till now it has been a very successful car around the world and the next step is how to get more cars to the country. So, it looks very promising for the time being.

Tom von Bonsdorff, Managing Director, Volvo Auto India

Express Drives: Coming back to the plant once again, over the last few years whenever we have interacted with Volvo Auto India, the response has been that the cars are already competitively priced. Now, a lot of your competitors have CKD (Completely Knocked Down) operation in the country, but, despite that, the prices of their cars haven't really reduced. So, for Volvo Auto India, do you think the local assembly will make a difference to the end price for the consumer?

Tom Von Bonsdorff: Like you said, we have been here for a number of years and the idea we have had so far is that there is no use for us to sell cars in India if they are not competitively priced. So, what we have done is follow our global pricing strategy and you could say that we are more or less at par with our competitors. The idea is not really to change that strategy, so, I think we are not about to see any changes in the pricing of the XC90, for instance, when it is locally assembled.

Express Drives: So, there won't be a drastic price drop?

Tom Von Bonsdorff: No, we have quite a competitive situation right now where we are priced and where we want to be priced and I don't see any reason now to do any further changes on the pricing.

Express Drives: And once the plant is operational in the long term, do you want this facility to produce cars only for India or will you also look at exports?

Tom Von Bonsdorff: Yes, I think in a few years, especially Asia, on the whole, will look very different from what it is now. We have seen development in China as well as South-East Asia and big growth everywhere just like India. So, the production capacity will be developing as time goes by, but, as of now, the only plan for the facility we have in Karnataka is to focus on the Indian market and for a start, we will only supply to the Indian market.

Express Drives: A lot of your competitors have some sort of development operations in India. So, now with Volvo Auto India now getting a plant here, are you looking at setting up a technology of R&D centre?

Tom Von Bonsdorff: We have to go one step at a time and assess the situation. For the time being, there is no plan for an R&D centre or a technical centre in India.

Express Drives: You are one of the first manufacturers to get a plug-in hybrid car in the country. So, what is your take on the Government's policies regarding hybrid and electric vehicles?

Tom Von Bonsdorff: First of all, the main policy of the Government is to introduce BS6 emission norms by 2020. That is, according to me, a very good policy because we really need to have a solid policy for the cars that are being driven on Indian roads and are compliant to the latest emission norms. BS6 is really good to make sure that any car being sold in the country has to fulfil these basic demands. That's one important thing. Then I really would hope that there are strong incentives to buy hybrid as well as electric cars. Although there still will be a number of years where we go a fully electric for local as well as international brands and I would really hope to see that there are strong incentives for hybrid and electric cars like lesser road tax, registration tax etc. The latest news indicates that these vehicles will have a good support from the Government. But, I think to be able to fight the pollution in places like Delhi; we really have to work hard on that. The reason why some of the European countries have a high penetration of hybrid cars, for instance, is not because they are more mentally conscious that Indian people, it is simply because a vehicle buyer gets more incentives for hybrid or electric cars, in different ways like free parking or low registration tax etc. But, incentives need to be there to drive consumer behaviour in order to prioritize electric cars and we really need that support from the Government.

Express Drives: There was a recent global announcement from Volvo wherein it was said that the company would not be developing any more new diesel engines beyond 2020. So, there are going to make do with the current set of diesel engines you have in various versions. Which means electric is the future for Volvo.

Tom Von Bonsdorff: The statement from our CEO has maybe been portrayed more aggressive than intended to. But, it doesn't mean that we stop selling diesel cars. We do see that the future is more towards electrification and what we have in the pipeline now is we have the XC90 T8 Plug-in Hybrid on sale in India. In fact, that is the first plug-hybrid SUV which was launched here and what I want to do is bring in electrification to all our models which we will have on the upcoming models. And I want to bring in those cars to India as soon as possible. However, provided there is an incentive based system for such cars as it makes it possible for consumers to buy them. In 2019 we will launch our first fully electric car and of course, we want to have that in India as soon as possible. As a company, we have a vision that by 2025 we want to sell one million electric Volvo cars worldwide. And I really hope that out of this one million mark, a considerable number is sold and delivered to Indian consumers.

Tom von Bonsdorff, Managing Director, Volvo Auto India

Express Drives: Apart from that, we have been talking about electrification and now if you look at the recent announcements regarding GST particularly for hybrid and electric vehicles were a little disappointing. Are there any particular expectations that you have from the Government as you stated that there should be a proper incentive based system in place, but, how do you think the companies and the government, both can play a role to push this electrification process forward?

Tom Von Bonsdorff: Like everything, we are very focused on safety where the mindset of the people, the Government and car companies need to be in sync to bring in the right technologies. The same thing comes when it comes to concern for the environment and there needs to be a desire from the people to be interested in buying an environment-friendly product. There also needs to be an interest with the Government to incentivize such environment-friendly products. And of course, when speaking about car companies should focus on developing the technology and secondly to make it available as affordable as possible. I think that we really to come together to have this synergy and make sure we can increase the number of environment-friendly cars. I think we would mainly focus on hybrid cars, plug-in hybrids as well as fully electric cars. It is really important as we all know how bad the air pollution situation is. And we need to fight that in various ways.

Express Drives: What are the next hybrids or electric models you are looking at introducing in India?

Tom Von Bonsdorff: Well I would have to say that I will leave it for a later announcement and save some good news for later, but, it is clear that we want to expand our hybrid as well as electric range.

Express Drives: If you can tell us that right now what kind of dealership network does Volvo Auto India have and to what number do you plan to expand?

Tom Von Bonsdorff: It is a really important point that how we can build the confidence of customers which is an important focus for us. We just inaugurated our 18th showroom last week in Pune. We are opening up few more showrooms as well as workshops before the end of the second quarter which would include Delhi, Lucknow, Ludhiana and I think by the end of the year we should be at about 25 dealerships which is a fairly aggressive plan for this year.

Express Drives: If you look at the segments you operate in, a lot of your competitors also have regular engagement programmes for consumers. Do you have any such plans to engage potential as well as existing customers through such events?

Tom Von Bonsdorff: India is a very large country and you have target and invite customers for a good level of engagement events where they can experience the vehicle as well as drive it. For instance, we have a big launch event for the S90 in Mumbai in November 2016. We have had a golf tournament for customers in India as well as we did a test drive for customers in Coimbatore of the Kari Motor Speedway for the S60 Polestar. We had a good response with 150 customers who drove the S60 Polestar and had a fantastic performance experience. So, we want to continue that culture and I'm sure that when the V90 Cross Country launches, we would want to take potential customers to take them on an adventurous drive experience.

Express Drives: According to you what is it that makes Volvo as a brand stand out compared to your other European competitors and what should a potential customer consider while thinking about a Volvo car?

Tom Von Bonsdorff: The main thing is that we are very people-centric. We are not talking as much about machines and metal, etc as some of our competitors might be doing. So, the main differentiating factor in the Volvo brand is safety. We had two founders of the company, Gustaf Larson and Assar Gabrielsson and in 1927, they founded the company and in the founding statements of the company, they said that cars are driven by people, therefore, the guiding principle behind everything we do at Volvo is and must remain safety. Since then, safety has been at the core of our brand. That is what forms our ethos. We also think a lot about how we can make the service experience people-friendly and how we can make the environment in the car people-friendly. So, we design our cars around people and our service is very much around people. That is a way to explain how we differ from our competitors.

Express Drives: There is a lot of action happening from Volvo in the world of autonomous driving and again there is also this commitment from Volvo of no deaths in their cars. So, from an Indian perspective, how do you see this turning out because autonomous driving technology has a lot of challenges in India. So, will the commitment stand at the same time in India as well when autonomous technology is rolled out globally?

Tom Von Bonsdorff: People usually smile at me when we discuss about autonomous driving and they have asked me if I have been in a situation of driving in Delhi on a Monday morning and if I think I can use autonomous driving in that particular area, for instance. Of course I see challenges in some areas, for example, road marking is an important part of how our systems work. If the road marking isn't there, there are some parameters in an autonomous car that may not function in the right way. But, to me, I think autonomous driving is very important for a country like India, maybe not only because of the technology itself, but if I take an example like auto-braking function in an autonomous car. The function means that if the car in front of my car applies brakes, my car brakes automatically. We have seen some horrible incidents on Agra expressway where a car or truck is parked or broken down in the middle of the road during the night and another car collides with this car which can have fatal consequences. This technology which we have with us are safety features we badly need in India and so in my opinion autonomous driving is definitely something we want to push in India and not the least for the safety features. The company has a vision that by 2020, nobody should get killed or badly injured in a new Volvo car. And that I think is probably one of the reasons why we are the first car company in India started to sell cars with radar-based safety features which enable features like auto-braking.

Express Drives: For India, do you think that the autonomous driving technology is not completely automated but pockets of these technologies are available in the future, maybe the next decade. Is that the way ahead for India?

Tom Von Bonsdorff: We have already brought in some cars with auto-braking and adaptive cruise control function. So, I think those are the step forward in the way, but I really also emphasize the fact that we should not really neglect India when it comes to autonomous driving. There are some good roads where you can actually use it very well. So, we definitely want to push that here as well. Like any new technology or infrastructure in cars, you have to take it step-wise.

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