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Volvo pushes growth accelerator

Auto maker on course to achieve 10 percent market share in India's luxury car market in three years; 15 percent by 2020

Debojyoti Ghosh
Published: Apr 17, 2015 06:12:41 AM IST
Updated: Apr 16, 2015 04:23:38 PM IST
Volvo pushes growth accelerator

Tomas Ernberg
Designation: Managing director, Volvo Auto India
Career: Has been with Volvo throughout, for over 20 years
Education: Bachelors degree in economics, Middle East Technical University, Turkey
Interests: Tennis

Buoyed by the increase in luxury spending by a section of India’s growing affluent middle class, Chinese auto manufacturer Geely-owned Swedish carmaker Volvo Car Group is targeting a 10 percent market share in India’s luxury car segment in the next three years. Volvo Cars, which has a market share of 3.5 percent in the Indian luxury car space--dominated by German majors such as Mercedes-Benz, Audi and BMW--is confident of strengthening its foothold in the country. Tomas Ernberg, managing director, Volvo Auto India, says it is on track to achieve the target. Excerpts:

Q. What are your views on the progress made by Volvo Cars in the Indian market? How has the growth been so far?
We are quite optimistic about our progress. The demand for Indian luxury goods, including luxury cars, has increased tremendously. From Volvo’s point of view, we have been among the fastest-growing luxury car brand in India for the last three years. Despite growing at a fast rate, the Indian luxury market remains very small. However, it is expected to grow phenomenally in the coming years. The future is bright for us. Currently, Volvo Cars has a 3.5 percent share in the Indian luxury car market. Three years ago, it was less than one percent. We are aiming to achieve 10 percent share by 2018, and a 15 percent market share by 2020.  

Q. Are you focusing on any particular market in India? What is your strategy to boost sales volumes?
We have a lot of creative ideas on how to strengthen our foothold in India and boost sales volumes. We first try to understand our customers, the kind of businesses they are into and the hobbies that they have. Then we focus on various touch points to bring them closer to the brand. We began with Hyderabad as a test market and we have more touch points there than anywhere in India. We showcase ourselves at high-end restaurants and clubs where we are most likely to find high net worth individuals; we make them see Volvo around them. We are gradually replicating in other cities what we have learnt from Hyderabad. We are still not present in Jaipur, Udaipur, Vijayawada, Madurai and Bhubaneswar. These are some markets that we are looking at. We will tap them one by one. This year, we entered Surat and we will be opening in Kolkata next month. We are also looking at covering Baroda, Rajkot and the rest of Gujarat. We plan to enhance our product portfolio as well as service network to achieve the desired results.

Volvo XC90

Q. What were your sales figures in India last year? What were the key drivers?

We clocked over 1,200 cars in 2014. Sales of Volvo S60 (luxurious sporty sedan) and Volvo XC60 (a compact luxury SUV) continue to drive growth for Volvo Cars in India. In 2013, our sales figures included 913 units, up from 820 in 2012.

In the first quarter of 2014, we launched our first exclusive ‘By Invitation’ lounge at the T3 terminal in New Delhi where we also showcased the new generation S80 (sedan). Global unveiling of Volvo XC90 (SUV), new dealership in Chandigarh and other initiatives helped us drive growth. The new XC90 will certainly boost volume as well as brand image for Volvo Cars in India and our network expansion will support the volume targets.

We are increasing our segment share in Delhi NCR, traditionally South Indian markets such as Hyderabad, Tamil Nadu, Kerala and Bangalore are strong for us. Our focus is to make inroads into the luxury segment in Mumbai and Pune as well. Mumbai is a very big market. We have a new dealership and will be coming up with two new facilities in Mumbai. At present, Volvo Auto India has 14 dealerships across 10 states such as Delhi, Haryana, Gujarat, Maharashtra, Tamil Nadu, Andhra Pradesh among others.

Q. What’s Volvo Cars’ roadmap for the competitive luxury automobile market in India?
Gradually, we are looking at increasing our segment share. The new design language of Volvo is its all new Drive-E engines, smaller in size with higher mileage and higher horsepower and torque. We will now only produce four cylinder cars that will be environment-friendly. We now have some of the least CO2 emissions among all luxury car brands in the world. In India, government policies are gradually taking a note of this along with safety measures. Sooner or later, cars will be taxed based on emissions that they let out. This will put us in an advantageous position. An array of new product launches will enhance our segment share globally as well as in India.

Q. How important is India as a market for Volvo Cars globally? What are the key areas of concern in terms of investing in India?

India continues to be an important market for Volvo Cars. It is an emerging market and an important one to be in for any company with a significant global presence. Moreover, India is one of the fastest growing luxury car markets in the world with limited penetration of cars. While other markets are gradually moving towards saturation (point), India is among the few markets with ample growth opportunities. Today we have the full support of our senior management and India is among the highest investment per car market for Volvo globally.  

Q. How do you see the overall luxury segment in India going forward? What are the areas of concern?
Current average global penetration of luxury cars is around 10-plus percent while in some parts of Europe, it’s around 25-30 percent. In India, the penetration is approximately 1.5 percent of the total industry volumes, making it one of the smallest luxury car markets in the world. However, despite the slowdown in the mainstream segment, the Indian luxury car market continues to grow and is one of the most exciting in the world.

In 2014, 33,000 units of luxury vehicles were sold in India of the total 2.6 million cars. This penetration was less than 10,000 cars 5-6 years ago. So it has grown very fast and the projection is that the penetration will grow to 3 percent by 2020. In absolute terms, we expect the total industry volumes to be close to 5 million units and the luxury cars volumes to touch around 1,50,000 units from 30,000 now which is very promising.

(This story appears in the 01 May, 2015 issue of Forbes India. To visit our Archives, click here.)