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| 'We've just scratched the surface of export potential' | | Q&A: Mrityunjaya Singh, Managing Director (India Operations), Volvo CE |
| Sohini Das / Kolkata Nov 05, 2009, 00:53 IST |
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 After growing at around 30 per cent a year for the last few years, Volvo CE — a part of the Sweden-based Volvo Group and a leading player in the $3-billion construction equipment (CE) industry — came up against a slowdown in demand. Having crossed a rough patch, the company is set to launch new products this month even as it plans to increase localisation at its Bangalore plant in the coming years. In a chat with Sohini Das, Managing Director (India Operations) Mrityunjaya Singh says, while short-term forecasts are strong, Volvo CE plans to introduce new products in India in a phased manner. Excerpts:
Do you see a pick-up in demand?
The quarters ended December 2008 and March 2009 saw the full impact of the recession. The market has been stabilising from April onwards and has been steadily growing. The trend has been positive up to October this year and short-term forecasts are strong.
Your Bangalore plant manufacturers around half of Volvo CE’s products, while the rest is brought in from countries like Korea and Sweden. Do you have any plans to increase localisation here?
Locally manufactured machines comprise less than 50 per cent of the total units sold. Having an established production and vendor base gives us a platform to introduce locally built machines based on the company’s strategic objectives. Volvo CE introduces a new product every one or two years and we will continue to introduce products for India in a phased manner in the coming years. Currently, our portfolio here has around 30 products.
Our plant in Bangalore manufactures road machinery and we enjoy the third position in the market for that product. Nonetheless, our product positioning targets are achieved through a mix of machines imported from our various plants in the world and those manufactured in India, the imported part being the major revenue generator. Any improvement in our current position will be consequent to the localisation of some of the higher selling imported machines.
What would be Volvo’s focus areas in the coming quarters?
Mining and road construction are our priority segments, which we address with around 80 per cent of the equipment used. They account for just over 50 per cent of our total revenue.
Are you planning any launches in these sectors?
Yes, launches of hard products (machines) and soft products (services) are planned during the EXCON 2009 (the 5th International Construction Equipment and Construction Technology Trade Fair exhibition) this month-end at Bangalore. We would launch solutions for loading and excavation, as well as compaction solutions.
What about your rental business?
We have now rental offerings available from all 11 dealerships in the country. Out of these, four have been elevated to the full franchise of ‘Volvo Rents’ — a business arm of ours that provides rental software, training and support to rental franchises. Other dealers will be covered under this programme in 2010.
Similarly, used machine options are also available from these dealerships and, to facilitate faster repair of used machinery, we have built three full-fledged equipment workshops at our dealerships. I am still bullish on this subject as it has remained largely unstructured so far. There is a huge opportunity for serious players and it would surely be a growth driver for Volvo CE.
What percentage of your production is exported? Do you have plans to tap newer markets as well? Also, is there any cost advantage in exporting from your India operations?
We have just scratched the surface of the export potential of products made at our Bangalore plant. With the cost advantage we have, which is at 15-25 per cent, there are opportunities emerging in South-East Asia as well as other continents like Africa.
While this will be an area to watch out for, one has to meet changing environmental norms across countries with every passing year. However, several countries in the Saarc region that are not immediately affected by the fast-changing environmental norms would be the ones to watch out for.
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