“Volvo takes a holistic approach to fuel efficiency. We are delivering fuel efficiency across all elements of our machines via our engines, systems, operator behaviour and future technologies, while increasing the productivity for our customers, says AM Muralidharan, Managing Director, Volvo India, while sharing his views on the regional shift of construction equipment demand to BRIC nations, with Equipment India. Excerpts from the interview.
How do you look at the emerging scenario in India compared to the global CE industry after the crisis? And how is Volvo CE placed in this evolving scenario, globally, and specifically, in the Indian context?The year 2010 was encouraging for Volvo CE. Globally, we see some growth in Europe and North America. However, the biggest growth was witnessed in the BRIC countries. The demand trend in India is well expected to remain robust with firm demand fundamentals. Our strong and committed intention is to capitalise on this growth momentum.
Describe the growth pattern so far, and how does Volvo look at ending this fiscal (in terms of overall sales performance of Volvo CE). There has been a significant sales shift from our traditional European and North American markets towards BRIC countries. By Q3 in 2010, BRIC markets accounted for 67 per cent of Volvo Construction Equipment sales in number of units, wherein China was the main contributor.
What sort of top line growth is Volvo CE looking at in the next five years and which sector do you see the growth coming from? In India, Volvo Construction Equipment expects a strong top line growth of 10-15 per cent y-o-y over the next five years. The growth comes from increase in current product sales and also introduction of new products. Focus segments are mining, road construction and other infrastructure projects including ports and power projects.
How sustainable would the growth be, especially in the BRIC nations, and what do you think will be key drivers for sustainable growth? In BRIC nations, the GDP growth is expected to be stable in the coming years. In India the GDP growth is projected to be eight per cent and above in 2011-2012, percentage of GDP in infrastructure is also increasing and this drives growth as any infrastructure project takes three to four years. Over the next five years, we are confident that investments in infrastructure will take place, and the market will grow.
How has Volvo CE geared up to meet the challenging demands that the shift of market growth from Europe to BRIC nations brings? Volvo Construction Equipment has so far invested more than $100 mn to be positioned in the top three among BRIC countries. We are investing in production capacity, technology and in BRIC specific products. We are investing in India. It was recently announced that local production of medium sized excavators from our Bangalore plant for the Indian market will begin from end-2011. We are also ensuring that we have the right distribution network in place to manage the growth.
Brief us about your R&D spend, and also throw some light on where it is heading in terms of fuel efficiency, use of hybrid technology, etc?In 2009, Volvo Construction Equipment spent $335 mn on research and development including capital expenditure (CAPEX), which is around seven per cent of our total yearly turnover. Environmental care is one of Volvo’s core values and Volvo is ensuring we meet all environmental standards set by the government of India. Volvo takes a holistic approach to fuel efficiency. We are delivering fuel efficiency across all elements of our machines via our engines, systems, operator behaviour and future technologies, while increasing the productivity for our customers. Hybrid technology is one part of this wider range of fuel saving solutions.
How do you look at competition in this sector; from domestic and international players; and the unorganised sector as well? What differentiates Volvo CE from its competition? We welcome healthy competition in a growing market. Consolidation has taken place globally, and we are expecting similar patterns in India as well. Volvo offers a complete set of solutions for our customers, including wide range of hard products and soft offerings. Also, Volvo has pioneered the concept of CareTrack in India, a telematics system which allows for monitoring of the machines through GSM connection and provides preventive maintenance of machines. Volvo provides low cost of operation and excellent service provided by our competent distribution network.
How do you look at the purchasing patterns of the end-user segment, which seems to have given priority not just to the brand, but more importantly, for efficient service and easy availability of spares?We believe increasingly that customers in India today, make their purchasing decision based on the after sales service. Our dealer network presence across India ensures the easy availability of spares and excellent after sales service.
Is there a move towards more affordable product lines with more value add-ons? Are there any plans for diversification or to further the product basket?Globally we are going for a dual brand strategy with which we will be able to address a majority of the market anywhere in the world. We are offering one premium brand and one value brand.
How do you look at a platform such as BC India?Bauma ConExpo in Mumbai is the first Indian edition—we have been actively participating in Bauma Munich, Bauma Shanghai and Con expo US in the past. We are eager to participate and expect a good response since MMI are experts in conducting successful exhibitions around the world. We are expecting that this will be a major customer facing platform mainly with retail customers.