Volvo global CEO Olof Persson, on his first to visit India, explains to CNBC-TV18 that the company will grow step-by-step to be No.2 in the Indian commercial-vehicle market.
We believe that in the long term India has all the prerequisites and the fundamentals for continued growth and therefore, we will continue to invest.
Despite the recent slump the commercial-vehicles market in India is set to double by 2020 and one of the companies that is uniquely placed to garner a large share of the market is the world’s second largest truck maker and Swedish auto giant, Volvo. Volvo global CEO Olof Persson, on his first to visit India, explains to CNBC-TV18 that the company will grow step-by-step to be No.2 in the Indian commercial-vehicle market.
Below is an edited transcript of the interview on CNBC-TV18
Q: Globally, the commercial-vehicle market has been going through rough weather. Is It a part of the group strategy to increase focus more on the emerging markets as compared to more established markets that you are present in?
A: I would like to say that India, for the Volvo Group, is a home market. We have been here for 15 years as a group and we have developed the Volvo brand over the years in, what I believe, a very good way addressing the premium segment both in trucks and busses.We believe that in the long term India has all the prerequisites and the fundamentals for continued growth and therefore, we will continue to invest.
We also have created a very good platform, with our cooperation in a 50:50 joint venture with Eicher which allows us access to knowledge and products from their stable. So, that puts us in a very good position in the Indian market.
Q: Along with services, trucks, busses and construction equipment, what is the kind of investment will Volvo make in the Indian market?
A: Volvo's investment, for the next few years, is around Rs 2,000 crore in product development, facilities, engineering capabilities and human resources development.
Q: Are you willing to enter a price war with some of your established Indian rivals? Will you enter the mass segment too?
A: In our joint venture with Eicher we are already in the competitive and value segment. In addition, we will develop a value truck which will be produced in India for the Indian market for the customer segment below the premium segment. So we are catering to both ends of the price segment by thanks to the exchange of knowledge between Volvo and the Eicher group.
Q: What sort of a value truck will this be and what are some of the other Asian markets where it will be produced?
A: Over time, we plan to launch a range of products to address the different markets in South, East and Southeast Asia and we are really excited about this.
Q: What is the kind of price bracket that you would want to introduce the products in?
A: Since we plan to introduce these products over the next few years, the price and features will be announced at a more appropriate time.
Q: Can you explain the relationship through the joint venture you have with Eicher Motors in India?
A: I am really pleased with the way the joint venture has developed. The joint venture has brought to together some of the best minds from across the world in a very open atmosphere. So, the Volvo Group has learnt as much from Eicher as Eicher has from Volvo. And the process has thrown up a whole range of new ideas
Q: Are you already applying some of those ideas in your global manufacturing processes or will you now begin to implement those ideas?
A: I think it is the latter. This is a journey for us and we are taking step-by-step since we plan to be in India for the long term. I am really excited about it.
Q: Do you think that that the Indian commercial-vehicle market has been a duopoly for far too long and that has offers an immense opportunity for manufacturers like Volvo?
A: I don't look at it from that point of view. We are No.3 in India and our aim is to become one of the top two commercial-vehicle manufacturers in India.
Q: What is the kind of timeline that you would be happy with to end up being one of the top two manufacturers in the Indian commercial-vehicle market?
A: That's a very difficult thing to state. I have ideas but I think we will continue to develop and make sure that we do the right things- increase the number of customers and offer the right products. We plan to take one step at a time to grow faster than the market and thereby also grabbing market-share.
Q: How important is the role of emerging markets, especially India and Brazil, going forward?
A: I think emerging markets have the ability to grow at a faster pace given the fundamentals in the market. But I think analysts and businessmen will be disappointed if they believe that the development will be straight or very linear. In general, it is important if fundamentals are there in emerging markets because, according to our long-term view, that is what will drive the market.
Q: Is India among the top growth markets for Volvo globally?
A: Certainly. India is one of the fast-growing markets over the years. Our the construction equipment foray alone has grown much over the last 10 years So the importance of these markets to the group will, I believe, over time eventually assume greater importance.
Q: Can you give us a rough idea of the kind of market share that emerging markets presently constitute to overall Volvo's global sales?
A: Our traditional market, Europe and North America, roughly contribute about 50 percent and the balance comes from eastern Europe, Asia and South America. So we are very much a global company with half of our turnover coming from emerging markets. I believe it is a very healthy balance because it allows us to participate heavily in these markets.
Eicher Motors stock price
On August 22, 2014, Eicher Motors closed at Rs 9994.30, up Rs 4.55, or 0.05 percent. The 52-week high of the share was Rs 10620.00 and the 52-week low was Rs 3100.20.
The company's trailing 12-month (TTM) EPS was at Rs 158.74 per share as per the quarter ended June 2014. The stock's price-to-earnings (P/E) ratio was 62.96. The latest book value of the company is Rs 303.17 per share. At current value, the price-to-book value of the company is 32.97.
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