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.
"It's impossible to grow on imports in India. That's why we are entering India with local assembly," Volvo Cars President and CEO Hakan Samuelsson told a group of visiting Indian reporters here.
For Volvo Cars, sales in India are at 1,500 units per year and "it is too small, primarily because of the restrictive import regulations", he added.
The company is betting on the long term prospects for the Indian market and believes that by 2025, India would be one of its major Asian markets after China.
With local assembly, Samuelsson said, the cost level would go down and the company can be more competitive and double its volume.
"So, our Volvo XC90 would be more competitive and more accessible to more clients. This is what we want to achieve," he said.
He asserted however that the company would not lower prices as it has plans to invest substantially in its network by being more profitable.
"Being more competitive does not mean that we are lowering our price. Prices should be set according to the value of the car and that we would not change," Samuelsson said.
Volvo XC90 is priced at Rs 71.97 lakh and Rs 81.23 lakh (ex-showroom Delhi) for two variants.
Volvo Auto India, a part of Volvo Cars, has 5 per cent of the market in the luxury segment and is aiming to double the volume by 2020.
The Indian luxury car market is at around 34,000 units, down over 5 per cent from about 36,000 in 2015.
When asked about investments, Samuelsson said, it was a small amount as the company has rented premises from Volvo group.
"It is only the basic equipment that we need for assembly. If we localise more in the future, then we might invest more, but right now it's just the starting point," he said.
On whether Volvo Cars would assemble other models in India, he said: "We would start with XC90 and we would have to continue from there and definitely not exclude other models."
Commenting on models that could come to India, Samuelsson said the new SUV XC40 "could be of interest to India, but it's too early to talk about that".
Volvo Cars, which is putting up a factory in China for electric cars, is looking India as one of the future potential markets.
"Probably, I think India is a very good market for electric vehicles. I would say that interest in new technologies in India is rather impressive," he said.
Stating that adaptation of new technologies is rapid in India, Samuelsson said: "That is also a sign that a high tech propulsion and electric vehicle would also be something that they would adapt too."
Volvo Auto India established its presence in India in 2007 and has dealership network in Delhi NCR, Ahmedabad, Surat, Mumbai, Chandigarh, Coimbatore, Hyderabad, Chennai, Bangalore, Kochi, Vishakhapatnam, Kolkata, Vijayawada and Jaipur.