Volvo Construction Equipment Bullish on Business Potential in India

Mr. Olof Persson
“Volvo Construction Equipment (CE) is bullish on the business potential in India. We intend to capitalize on the growing potential through offering our total equipment solutions. This would range from excavators to road construction equipment. Equipment offering would be backed by requisite customer support.” This was stated by Mr. Olof Persson, President & CEO, Volvo Construction Equipment during a recently held round table conference in Bangalore coinciding with his maiden visit to India. Partha Pratim Basistha had an exclusive opportunity to interact with him on the sidelines of the conference to learn about Volvo CE’s long-term business strategy that would position the company as a complete equipment solution provider in India. Excerpts.

Global and Indian Market Observation
The year 2010 was encouraging for Volvo CE. This is so because during Q3 (compared to Q3 2009) the total construction equipment market was up by 31% and recorded a growth of 16% in Europe whereas it was 25% in North America. The biggest growth was witnessed in the BRIC countries by 44%. Indian market increased by 42% in the third quarter vs same period last year. BRIC countries account for 49% of sales for Volvo and Volume sales in these countries are accounted by China followed by India, Brazil and Russia. The demand trend in India is well expected to remain robust with firm demand fundamentals. Our strong and committed intention is to capitalize this growth momentum.

Basis behind the demand projections
The GDP elements are strong basis behind the demand projections. India is expected to grow at a high rate of 8.2 percent making us to justify our projections.

Construction Equipment

Any independent Volvo CE’s projections
As understood, we are trying to fulfil high demand of our equipment from big size projects initiated by the government in the core construction sector. We are also looking for projects from the private sector and equally bullish on the mining sector as many of the government and private mine owners have large scale expansion plans and has lined up huge capital investment. Based on official outlook analysis the total Indian construction equipment market will be above 60,000 units by 2014.

Are sales projections well substantiated going by the cyclic nature of the construction and mining industry?
I agree that the market is quite cyclic in India like other global markets. However, despite having its cyclic nature, the overall fundamentals are well expected to remain strong in India leading sustained demand.

On offering total equipment solutions in India
Our sales target would be backed by promoting the composite range of equipment from Volvo’s CE stable to the Indian construction and mining sector. This would consist of excavators, one of our main products in India, motor graders, articulate haulers, soil compactors, pneumatic tyre rollers, paver finishers, and wheel loaders. I am quite hopeful of strategy to offer our total equipment support to the Indian market. The optimism is backed on Volvo’s equipment positioning that are technologically well refined on operations, synthesized with safety features that provide high equipment uptime during its entire operation cycle. Volvo’s products are technologically well advanced owing to the fact that they have been manufactured by brands that Volvo acquired in the recent past. The acquired brands have been manufacturing technologically proven products in their area of application. This is for brand Ingersoll Rand for road construction equipments and SDLG for wheel loaders.

Are acquisitions planned to enhance product portfolio?
Acquisitions are not planned for the time being. Volvo plans to grow organically to expand its footprint and enhance its product offerings.

Would your sales strategy be centered on the convergence model?
To an extent yes, we are looking to market our total equipment solution to a single customer handling big projects. The customer would prefer to use other Volvo products based on his experience the qualitative value the products can deliver as compared to other contemporary products.

Construction Equipment

On availability & customer support backing equipment promotion?
The total equipment support would totally be backed by availability. The complete training to the dealers remains our key focus for knowledge dissemination to the customers on equipment usage. Volvo has its own well placed matrix for dealer selection. The matrix takes into account the availability of service engineers with the dealers and their technical skills. Performance of the dealers are evaluated on a regular basis. We intend to follow the strategy to provide adequate customer support. Equipment availability and customer support would be strengthened by expanding Volvo’s network in India. You would like to know that as to date, Volvo has 93 service stations in India, 52 warehouses, 139 sales officials and 636 service personnel with 11 dealers. To be honest with you, we had just 3 dealers, seven service stations, and four warehouses in 1998.

What are the reasons for delayed introduction of backhoe loaders in India despite good market potential?
We are in the evaluation process of the backhoe loaders market in India and would not like to make a steadfast entry in the immediate term. Our strategy is to evaluate how competitively we can offer our backhoe loaders in the Indian market vis-à-vis other contemporary products in terms of technology. We would also examine the backup customer support and the service solutions we can offer for our backhoe loaders with a competitive note. The post examination of the competitive possibilities, we may contemplate to introduce backhoe loaders in India.

Mr. Muralidharan as the new MD

Our sustained focus is to make Volvo a global company. In accordance with this, it was the decision of the company to bring in Mr. Muralidharan as the new MD in India. Mr. Muralidharan has a good global exposure. His earlier stints has been in Brussels for four and half years, in India for five and a half years, and four years in Singapore prior to taking over the new role in India. The gentleman has a great deal of experience in road construction equipment. In the new role he would help us in continue to build on the business strategy of the company to offer total equipment solution.

Strategy to take upon pricing
Increased localization of the equipment would be our focus. In accordance with this, we have initiated the process of manufacturing excavators in India at our Peenya plant near Bangalore. The excavators manufacturing at the plant would be of medium capacity range. We have brought our engineers from Korea and Germany to undertake certain reengineering in the excavators to be manufactured. The engineers are also providing their assistance in setting up the manufacturing process. We would focus on increased localization of the excavators to be manufactured. However, complete localization of the product, which is our intention would take a span of 3-4 years. The excavators are likely to be rolled out by the end of 2011. However, I would like to mention that qualitative features make our equipment come at a premium. Nonetheless, the total cost of owning a Volvo product is much less. This is owing to less fuel consumption, better hydraulics and controls for better equipment maneuverability at the job site.
NBMCW November 2010
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