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Volvo shifts into top gear to drive Indian luxury buses

Fakir Chand in Bangalore

AB Volvo, one of the world leaders in transport vehicles, goes into top gear to dominate the Indian luxury bus segment by transferring its B-7 chassis know-how and bus-building technology to Indian firms.

Though the $20-billion Swedish company entered India four years ago with a wholly-owned subsidiary to ostensibly sell its heavy duty trucks on a large scale, it changed its focus midway into road construction equipment and transport buses to sustain its initial investment of Rs 3.75 billion in its Indian operations.

By the time Volvo's state-of-the-art assembling plant took off at Hoskote on the outskirts of Bangalore during 1998-99, the heavy duty commercial vehicles' market, dominated by the likes of Telcos and Ashok Leylands, began to taper off and slow down in sales.

In a bid to regain its momentum and make up for the slump in truck sales, as its B-7 model was priced over Rs 2.5 million, or much higher than a Telco or Leyland truck chassis, Volvo India Ltd started assembling B-7 luxury buses for the premium passenger transport segment.

The overwhelming response during the last two years for its trial buses from private transport companies, tourist corporations, and state-run undertakings has made the parent company to transfer its technology to Jaico Automobile Engineering Co of Azad Coach Builders' group for setting up a dedicated Volvo bus assembly plant near Bangalore.

Set up with an initial investment of Rs 70.5 million, the state-of-the-art facility has an installed capacity to build about 300 buses per annum.

"During the first year of operations (2002-03), we will be rolling out about 100 buses, for which we have received orders from various private and public sector operators in south India and Maharashra," Azad Group chairman B S Chadha told rediff.com in Bangalore on Friday.

Incidentally, the first luxury bus that took Prime Minister A B Vajpayee and his entourage to Lahore way back in February 1999 was designed and built at Azad Coach facility, which later went on to make hi-tech premium buses for Delhi-Lahore and Calcutta-Dhaka routes.

The Azad group is targeting a turnover of Rs 750 million at the end of this current fiscal (2002-03), up from Rs 350 million it registered during fiscal 2001-02, with major revenue coming from its new facility.

Admitting that Volvo has set its sights on India not only as a major domestic market for its multiple transport vehicle operations, but also as an Asian hub for exports, Volvo senior vice-president for Asia-Pacific region Finn Adolfsson told rediff.com that the potential for outsourcing transport products from India was encouraging on account of the country's high skills and cost-effective operations.

"India is only the four country besides China, Mexico and Poland where Volvo has transferred its technology in chassis-making and bus-building. More than luxury, our objective is to introduce world class buses in the sub-continent for maximum passenger comfort, safety, and speedy transportation across or within cities," Adlofsson stated.

With the transport vehicle markets in North America and Europe virtually stagnating or growing only at flat rates, Volvo has turned to the Asia-Pacific region for sustaining its business growth. Its entry into developing markets like China, Malaysia, Indonesia, and India has encouraged the Swedish company to make substantial investments for launching its manufacturing and assembling plants in the region.

Volvo India managing director Ulf Nordqvist hinted that the company would be entering into similar tie-ups with other AC coach builders across the country, for penetrating the northern and western markets in the coming years as the popularity of its luxury buses in the premium segment picked up momentum.

"We have received excellent response from various transport and tourist operators in southern India for their inter-city or inter-state services. Even state transport corporations like APSRTC and KSRTC have placed orders for the delivery of B-7 luxury buses, which are being built at the dedicated plant by Jaico of Azad group," Nordqvist affirmed.

Though Volvo chassis is priced at Rs 2.7 million and its bus-building costs another Rs 1.5 million, the total cost of the bus, including registration charges, taxes, and insurance cover will push up its retail sale from Rs 42 million onwards to Rs 5 million for its premium variants.

In a bid to indigenise its production and step-up local sourcing of accessories and critical components, Volvo has entered into strategic tie-ups with various Indian auto ancillary units and component manufacturers, stipulating its global standards to maintain high quality.

The Rs 2.5-billion Volvo India, however, will continue to ship its engines from its global manufacturing facilities in Asia and Europe though it will have to shell out high import duty, constituting around 55-60 per cent.

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