Swedish auto major Volvo Cars will start assembly operations in India by the end of this year to expand in the local market and become more competitive as well as profitable. It will start assembling its premium SUV XC90 and has entered into a contract manufacturing agreement with Volvo Group India to use the latter’s existing infrastructure near Bengaluru and production licence. Volvo Cars President and CEO Hakan Samuelsson while talking to a group of Indian reporters at his headquarters at Gothenburg, Sweden last week said that it would help the company to expand its operations in India. The company is looking India in a long term prospective and expecting it to be one of its major Asian markets in Asia by 2025. Presently, Volvo Auto India, a part of Volvo Cars, has 5 per cent of the market in the luxury segment and is selling cars under the CBU import route since 2007. Below are the excerpts of the interview.
Q: Volvo Cars and Volvo Group are different entities, why did you specifically tie up with them for making in India?
Samuelsson: We are different companies today although we share the same brand. we are still sharing the name Volvo and we have certain activities as good neighbour. This is done as partners. This partnership could have been with anybody. We have to build cars in India but off course looking to options we could rent to do this in partnership with somebody else and not building investing into a new building and Volvo AV. Then we came up with a very good cooperation with them, where we would use their premises. It’s like good neighbours.
Q: What would be financial arrangement with Volvo Auto India and Volvo Group India? Samuelsson: Its short of normal contract with anyone. We would use their premises and off course the operation would be done with our expertise to secure the quality and everything. It’s a normal relationship where we would benefit with using their premises. PTI: How many units will you start with? What is your sales target in India? Would you expand the facility to produce other models as well? Samuelsson: We (would) have certain expansion. Today we are selling around 1,500 units and our first ambition is to double our market share in the segment. We want to achieve 3,000 car per year, we could not do if we would continue to sell the same volume as of today. With a reasonable time to reach 3,000, then we would expand the factory line there. But we would have to look into then we come closer to there. XC90 is with which we are starting with but we would also not rule out that we would expand that but we would have to come on that later on. XC90 is a good car for the Indian condition.
Q: How many years, you take to double your sales?
Samuelsson: We would take 2 to 3 years for that
Q: Which all parts would Volvo be sourcing from India?
Samuelsson: I do not have those details but off course we would source in India to fullfill the requirements for ‘make-in-India. That is our first ambition. As we start getting higher sales volumes, we would source more and more locally. This is a good start.
Q: Will the new XC40 also be made in India?
Samuelsson: We would start with XC90 and we would have to continue from there and definitely not exclude other models. But we have to look together with our sales department relay in the segment. We have three very interesting crossovers — two years ago we launched the XC90, this year the XC60, and the next would be the CMA architecture based XC40, which is a car that could be of interest to India, but it’s too early to talk about that.
Q: Where does India stand in Volvo’s global strategy?
Samuelsson: The Indian market right now, at 1,500 units per year, is too small, primarily because of the restrictive import regulations. It’s impossible to grow on imports in India. That’s why we are entering India with local assembly. That’s also an indication that we believe in India from a long-term point of view. Right now, with 20 million yearly sales, China is the largest in the world, but everyone sees India as the future market. In the premium segment, we want to be part of that market. Our SUVs are perfect for Indian road conditions.
Q: What investments are you putting for local assembly?
Samuelsson: It’s limited as right now it’s only the basic equipment we need for assembly. We are renting the premises from Volvo AB, so it’s not huge. If we localise more in the future, then we might invest more, but right now it’s just the starting point. We are hiring manpower also, but right now the numbers are very small.
Q: Volvo AV has a JV with Indian company Eicher and they source globally engine from its Pitampur facility. Would Volvo car would extend its interest in sourcing from the Indian market. Would it have similar kind of Synergy as Volvo AV in India?
Samuelsson: Its too early to talk about that because further localisation would require higher numbers and we would see that we are growing in higher numbers then these things we can discuss.
Q: Would you cater the surrounding geographies from the Indian plant?
Samuelsson: No. It’s only for the Indian domestic market.
Q: How would the Volvo customer benefit from localisation?
Samuelsson: The cost level would go down. Offcourse, we can be more competitive and thus double our volume. So Volvo XC90 would be more competitive and more accessible to more clients. This we want to achieve.
Q: Your overall target 2020 is 800,000 cars (eight hundred cars), where does India stand in that? Samuelsson: It will have a very limited part. Still with 3,000 cars it would not be very huge but I think that we would have to see India with a bit more longer term. India in 2025 would play, if the development continues, it could play a significant role for us in Asia. We have to strengthen our dealership network and basically first I think is to or present dealers to give them a better product offering and more service business.
Q: In 2019 Volvo is coming out with electric vehicle. your are putting a factory in China. Do you see electric vehicle play out in India as well?
Samuelsson: Probably, I think India is a very good market for electric vehicle. I would say that interests in new technologies in India are rather impressing in India. Look at IT side, everyone is very rapid to adapt new technologies. That’s a sign also high-tech propulsion and electric vehicle would also be something that they would adapt too.
Q: Volvo as a traditional car maker what kind of competition, do you see new age car markets as Tesla globally?
Samuelsson: I would not see them primarily competitors because they are entering into a new segment with electrification but I think that they have been a very fresh wind to the business and designed very attractive electric cars. I think that in a way they also heated up the whole discussions about future propulsion. So I could give credit for that. We are also taking our clear stands that we want to transfer all propulsion into electrification. It seems now finally we have a very good alternative for the future. So many discussions we know about gas and naphtha and all about possible future fuel but its now seems that electrification coming in and we are taking it. We are giving credit to Tesla for that. They have been the one of the first electric cars out. They are still rather smaller; I mean our prime competition is with more traditional premium cars makers as BMW, Audi, Mercedes, Land Rover, Lexus. Those are the cars probably where all customers would shop around between those special SUVs.
Q: Recently you were quoted saying that Volvo cars would phase out Diesel engines. Is that company strategy going forward?
Samuelsson: I did not say that exactly. I said that we need, if you look at the first step we have a very good all new generation of engines being released a year ago and off course they would improve diesel and petrol engines which are VEA (volvo engine Architecture) generation and been able now to reach low CO2 level in the short term, we need off these disel engine to improve combustions. If we look long term, we are firmly committed to electrification. First step is plug-in hybrid and second step is all electric cars. First one out in 2019 and we also commit that we want to bring one million electrified cars to the roads till 2025. This is also to mark very clearly that internally and externally we believe in electrification and that means off course if you look at long term, would be as we see things today development of all new generation of diesel engines on that time frame not very likely. So we set our future priority on rapid electrification in long term and off course short term improving the combustion engine and then we have to follow the preference of the customers. As we already have a brand new generation diesel engine and I think that its not very likely we would take another new generation after that.
Q: Did the Volkswagen harm the image of the European car makers in general?
Samuelsson: I do not think that it harmed the reputation of Volvo or any European car maker but probably harmed the image of the disel engine for all of us. It was not just Volkswagen diesel engine, generally people starts asking questioning as how good are they, …. First step is to regain. We have legislations, which are coming up now with vector cycle which is more realistic. But it would mean that Diesel engine would be more and more complicated. After more and more treatment you have to add certain liquid, so that diesel is kept in is more and more expensive and electric cars are getting more and more lower in cost.
Q: Speculations are that Volvo car is going for listing?
Samuelsson: Its comes from the fact that we have three new investors on board, three big institutions who have invested in so called preferential shares and those share has an option that it could be converted into general normal shares if there would be listing. That is an option connected to those shares but it is for the decision of the main shareholders to take. Currently we are not preparing for any IPOs. It’s an option for them.
Q: Are u preparing to partner with car sharing companies?
Samuelsson: we are doing in a way but not In the direct operations but we are working with Uber and we are supplying to them cars, which they use in trails to make their automated cars. So we provide base cars, they provide their software and then its relay. Their software that is responsible for all that they work. We supply them with the hardware. With required redundancy for an automated car has to two circuit and braking and electric gear system and so on. Then they put an huge computers enabling this ride hailing service. That is cooperation. Exactly that base car, we are also going to use because we need also an XE 90 redundant because after 2020 some year, we would also have Volvo with an auto pilot with the relay self driving car which when you are out on bigger roads, then you can switch on auto pilot. That is our concept and that would require the same car but not that type of software and algorithms. They are more running around in cities everywhere, we would have autopilot for the main road going to work.
Q: Are u talking to Android phone makers and others stuffs for this auto pilot?
Samuelsson: T his auto pilot we will develop together in our own company. Its a new software company which would provide brain to this car. We would have a cooperation with Google which we talked about some days ago and that is using android embedded in the car for new infotainment experience in the car.