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May 18, 2017 03:34 PM IST | Source: Moneycontrol.com

Volvo expects to launch more cars after starting local assembly operations

The assembly plant - one of only two set up by Volvo globally - will import vehicle kits in knocked down forms and assemble them. This will result in substantial reduction in taxes.

Volvo expects to launch more cars after starting local assembly operations

Swaraj Baggonkar

Moneycontrol News

Swedish luxury car maker Volvo, which on Thursday announced that it will set up a local plant in Bengaluru, plans to swiftly launch new models to significantly shake up its primary competition including Mercedes-Benz, BMW and Audi.

The company has joined hands with Volvo Group India - the makers of premium trucks and buses - for their infrastructure and production licenses.

The assembly plant - one of only two set up by Volvo globally - will import vehicle kits in knocked down forms and assemble them. This will result in substantial reduction in taxes. The plant will come on stream in the final quarter of this year.

Speaking to Moneycontrol, Tom von Bonsdorff, Managing Director of Volvo Auto India, said, “We had a strong growth in demand for our models. With the start of the assembly plant, we are trying to bring as many models as we can to India”.

Buoyed by the growing demand, Volvo is targeting 25 per cent rise in volumes this year to more than 2000 units. Last year, the company clocked 1,584 units sales in India.

“Based on Q1 numbers, I can say we are on target”, said Bonsdorff.

Volvo is among the last of the global luxury marques to open a plant in India. Peers such as Mercedes, BMW, Audi and Jaguar Land Rover (JLR) have already set up local plants.

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The company has been actively looking for a local assembly plant since 2012. However, it repeatedly delayed those plans as low domestic volumes did not justify fresh investment.

While the plant will assemble models starting with the premium sports utility vehicle XC90, Volvo will still import engines in fully built form from Europe.

“We been in India for 10 years now," said Bonsdorff. "We have been watching the competition who has had assembly. We had been investigating on how to best start our own operations here. We had a team who were looking at even contract manufacturing. In this scenario to go with a local partner is the best way to go. We found that to go with Volvo will be the best solution."

Volvo enthusiasts in India might be disappointed because the company is not looking to reduce prices of the XC90 after the model is assembled locally.

“The main benefit is that it gives us a comfortable position to risk exposure," said Bonsdorff. "For all models, we follow global pricing guidelines. The XC90 is priced on the same level as competition.”

While the Indian luxury market is still relatively small, it is forecast to grow rapidly in the coming years. Volvo currently has a premium segment share of close to 5 per cent and aims to double this by 2020.

Volvo has manufacturing plants in Sweden and Belgium, with two more coming up in US and China. It also has an assembly plant in Malaysia similar to the one coming up in India.
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