"Volvo has announced a strategic investment of Rs.90 Crores in its Peenya facility in Bangalore to expand its manufacturing footprint–double the production of its existing road machinery line, and commence manufacturing of medium sized excavators primarily for the Indian market. We expect to roll out excavators by the end of this year. We have added capabilities to manufacture 20-tonne and 29-tonne excavators at this facility. At current capacity, we estimate to be able to meet market demand by 2015. We have some surprises planned for the upcoming edition of Excon," says Mr. A.M. Muralidharan, Managing Director, Volvo India Pvt. Ltd., in an interview with S.K.Khanna.

Excavators from VOLVO to Roll Out Soon

Let us begin our discussion with Volvo flagship programme—Volvo Reman which was launched last year. What is the market response so far after its introduction?
While remanufacturing is a concept Volvo has actively promoted over the years, we launched a dedicated REMAN Centre at Bauma Conexpo (bC) India earlier this year, in February. We started with the remanufacturing of one component – hydraulic pump, and the response has been very good so far. We believe there is a great potential and plan to extend this facility to other hydraulic components, motors and prime movers.

The objective is clear: REMAN helps us provide a better service with more components ready from stock and with the quickest availability. Our customers are assured of high quality and reliability but at a lower price, and this makes sense to our customer.

During our interaction last time in Mumbai, it was mentioned that Volvo is to invest Rs.90 crore in India to upgrade and expand its manufacturing facility for Excavators as part of Volvo's focus on customers in BRIC countries. What is the current status of this project? By what time, it would start functioning commercially and its expected capacity and range of size (s) of excavators?
We announced a strategic investment of Rs.90 crores in our Peenya facility in Bangalore to expand our manufacturing footprint to double production of our existing road machinery line, and commence manufacturing of medium sized excavators primarily for the Indian market.

Excavators from VOLVO to Roll Out Soon

The investments have been made and, as planned, we expect to roll out excavators by the end of this year. We have added capabilities to manufacture 20-tonne and 29-tonne excavators at this facility. At current capacity, we estimate to be able to meet market demand until 2015.

What is Volvo’s overview about demand for excavators in the country for the next 2-3 years and Volvo market plans to aggressively promote its excavators range products?
We have seen market growth of more than 25% this year for excavators. Over the next couple of years, we see an average growth of 15–20%.

Local manufacturing is a part of our strategy to meet this growing demand. In addition, we will continue to leverage our strong distribution network, showcase and demonstrate our products range and capabilities at relevant industry events and forums.

A word about Volvo’s Rental business and services. At the industry level, why rental business and its financing is not growing as fast matching with CE sector growth? What enabling business environment needs to be created for its future growth?
While the rental business model has worked in some other markets, it is at a fairly nascent stage in India and is yet to be established. At present, it is more suited for compact products including backhoe loaders than larger products.

There are a couple of roadblocks to the development and growth of rental business in India. Apart from the large initial investment that is required upfront, industry players are yet to find viable returns on investment (RoI).

Also, rental rates are pretty stagnant in India and furthermore, the fuel cost increase is not helping the rental model. These factors need to be addressed if we want to see this model gain popularity.

Used equipment trend is picking up in the country with more companies making inroads into auctioning business. Is this a threat or an opportunity for the CE manufacturers?
Excavators from VOLVO to Roll Out Soon
The used equipment market gives a big opportunity to major equipment manufacturers like Volvo to certify, sell and auction machinery. Today, the market is fairly unorganized and is not professionally managed. In fact, it can be compared to how the used automobile sector was structured a couple of years ago.

Though the CE market is growing at 25%, the total market size for larger products such as excavators needs to grow. When this happens, we will see the used equipment market expand more rapidly. Auctioning is one way of organizing this business and we should see more used machines certified by manufacturers being sold in the future.

Don’t you think that CE import from low cost countries is distorting the market mechanism needs to be addressed sooner than later? What is Volvo’s take on this issue so as to bring a pricing discipline in the CE market?
I think in a growing market such as ours, with so many customer segments having diverse requirements, there is always room for other international players in the CE industry. And while there will always be the price conscious customers, there is a growing recognition of key parameters like quality, product utilization and after-market support.

The government is strongly committed to infrastructure development and taking measures to put it on fast track from time to time. What is your projection for growth in CE market in short-and mid-term and in the market place and in the CE market in India and what propels the customer—price, quality or brand? How is Volvo placed in terms of quality, brand and overall competitiveness of its products and service?
Excavators from VOLVO to Roll Out Soon
We expect to see the CE market grow 12–15% year-on-year, on average, for the next five years. Customers are primarily looking at value-for-money and total cost of operation (TCO). Pricing and brand are also in top 5 list while finalizing orders.

Volvo, as a brand, is highly positioned. We have been and continue to be very successful marketing our product range as one that offers the lowest cost of operation. In addition, we are backed by a robust distribution network, service and parts support.

Volvo CE will be one of the most important participants in the forthcoming mega event –Excon 2011 to be held at Bangalore, November this year. What will be the focus of Volvo presentation, its plan to showcase and launch new products and services and related new initiatives.
Excon is one of the important forums for Volvo to showcase our products. I can confidently say that we have some surprises planned for the upcoming edition of Excon next month. As usual, we look forward to engaging with our customers, partners, and industry.
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