Volvo CE Surging Ahead

A.M. Muralidharan
Volvo Construction Equipment has grown considerably in this one year and we are confident that we will keep growing faster than the market. Volvo first excavator rolled last year for its new plant is having good market response. The new excavator line is a part of Rs.90cr investment to upgrade the plant. The local production of excavators will mean greater machine availability for Indian customers; shorter delivery lead times and response to customer requirements more quickly, says Mr. A.M.Muralidharan, President, Volvo Construction Equipment, in an interview with S.K.Khanna.

What has the business performance of Volvo CE Indian operations been during this CY? Will it be able to maintain its earlier good tempo with positive impact on its sales and volumes? Do you think that the business contribution of Volvo CE Indian operations would be at the same level for Volvo global business this CY?
Even though there was a reduction in the size of the total market for construction equipment overall, Volvo Construction Equipment globally showed considerable growth in the second quarter of 2012, posting a solid set of financial results that saw sales in the three months up 15%.

Volvo Construction Equipment has grown considerably in this one year and we are confident of growing faster than the market.

Volvo India Construction Equipment business is contributing substantially to the global business and will keep doing so.

Volvo CE has recently announced the opening of its first Customer Contact Centre; what are the aims and objectives of opening this centre?
The Customer Contact Center 'V Care' will help customers achieve higher productivity by minimizing their machine downtime. The center will record and process all customer issues centrally and in real-time, giving Volvo CE the ability to monitor dealership customer serviceability and enable them to resolve customer issues quickly and efficiently. The new center is an integral part of Volvo CE's objective to offer customers total lifecycle care – from providing equipment to support and partnership – and ensure customer complete satisfaction.

Volvo Paver
The new center implements a process-driven Customer Relationship Management (CRM) model to enable customer focus and process efficiency. It is equipped with a fully automated system where a pre-defined TAT (turnaround time) at every step of the process ensures prompt customer service with escalation mechanisms built in if the dealer or technician is unable to respond to a query within the stipulated time. Volvo CE has set Key Performance Indicators (KPIs) to address all kinds of customer enquiries to measure performance and efficiency of dealerships and the customer services team. The center gives customers a single-point contact for complaints and resolutions, status updates on their enquiries proactively and consistency in serviceability.

What is the current status of commencement of manufacturing of medium sized excavators specifically for the Indian market? Do you think that as per company's estimation, the company would be able to meet market demand?
In November 2011, the first excavator rolled out was of Volvo CE's new excavator plant in Bangalore, India. The production of excavator sincreased substantially during 2012 and so far 50-60% of Volvo India's excavators sales are coming out of the Peenya facility in Bangalore. The plant will keep manufacturing road machinery. The new excavator line is a part of Rs.90cr investment to upgrade the plant. The local production of excavators will mean greater machine availability for Indian customers; shorter delivery lead times and response to customer requirements more quickly.

A word about company's Rental business, financing, leasing and used equipment sales business.
Volvo India empowers its dealers to be in the rental business.

Volvo India Construction Equipment still does not have retail financing option; we have tied up with various NBFCs and Nationalized Banks and also started increasing our volume in remarketing (Refurbishing machines).

The business in the road sector is waning out with important players diluting their stake in the road business. How would diluting stake in road business impact the market of road construction equipment business?
Dump Truck
We believe that there is an evolution of business model and therefore a shift from Build Operate and Transfer (BoT) to Public Private Partnership (PPP). There is a surge in PPP models with Government recently easing the norms for transfer of landallowing acceleration of infrastructure projects in sectors like railways, civil aviation and ports that are required to boost economic growth.

The government is also planning to invest $1 trillion in infrastructure during the Twelfth Five Year Plan. According to reports, the government is planning to set up a panel led by the prime minister to speed up approvals for road, rail and port construction, including as much as $18 billion of stalled projects.

In a recent move, the government is considering to regulate the import of second hand machinery. Do you envisage its impact on your Reman programme? Also your take on if this move will impact the much asked for level playing field to the players and encourage more competition?
Second hand machinery are used extensively in India and with the global downturn, customers are more likely to focus on using their existing machines for longer period of time than buying new ones. All manufacturers including Volvo focus on providing excellent aftermarket service to customers to ensure their machines have longer run time. We also have enough capacity and knowledge to repair old machines and therefore import is not high on our list.

Excavator
Competition is always welcome in used machine segment as long as we can commit to our customers about the availability and efficiency of these machines.

What is Volvo CE assessment on how the CE market in the country is expected to grow in the next 2-3 years? Are the current blips transitory and is CE market expected to re-bounce on the strength of country's massive infrastructure development awaiting ahead?
The Indian Earthmoving and Construction Equipment (ECE) market has significant growth potential. As per a CII-IECIAL report, from total revenues of $3.3 billion in 2010, it has potential to grow to $22.7 billion by 2020; and grow from over 60,000 units in 2010 to ~330,000 in 2020. Currently, though there is a slowdown in the market due to global downturn and lack of proper Government policies, however we expect it to pick up by Q1 2013 and grow as per the forecast.

The government is addressing the challenges faced by the construction industry. For example, there has been a delay in infrastructure projects due to time and cost overruns. Shortage of funds, environmental concerns and delay in government clearances added to this. Project delays have been caused due to land acquisition challenges, in turn causing major investment deferrals by companies. There is also a lack of structured regulatory and policy framework for PPP models which needs to be addressed.

However, the environment is beginning to look up with the government planning to invest $1 trillion in infrastructure during the Twelfth Five Year Plan. According to reports, the Government is planning to set up a panel led by the prime minister to speed up approvals for road, rail and port construction, including as much as $18 billion of stalled projects. It has also eased norms for transfer of land for PPP projects, allowing acceleration of infrastructure projects in sectors like railways, civil aviation and ports that are required to boost economic growth.

Do you think that in the present slowdown phase, the CE companies need to tweak their business models in terms of more proactive brand marketing, revisit their distribution strategies and fine tune their operations to keep the business sentiments high within and outside? Is there any new initiative from Volvo's end to be more proactive in its segmentation approach to promote and market its extensive products range and related technical services the current phase?
In difficult times, we need to look at our internal organizational efficiency and our dealer efficiency to make sure we are profitable. It is also our continuous effort to keep looking for opportunities in various segments however in the current scenario, the focus is more on aftermarket, since customers will postpone their new purchasing decisions and will keep utilizing their current machine.
NBM&CW February 2013
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