The market may be poor, but Volvo goes ahead with its trucks
A sliding industrial output, falling exports, low GDP growth. Add to this gloomy backdrop the surfeit of trucks acquired by the transport industry in the last two years in the hope of a spurt in freight movement and construction of expressways: definitely not the ideal time for a new player to pit itself against giants of the Indian auto industry. But Volvo's keen to overcome all odds and make a foray now, to gain a foothold in India.
On June 15, the Swedish auto giant will roll out its first Indian-made heavy-duty truck from its Rs 300-crore plant near Ban-galore. "We're coming in with a product distinctly different in terms of value to our customers, so that we find ready acceptance. We've come here with a long-term commitment, and we're not in a hurry. But in the course of time, we'll span the entire market," says Ravi Uppal, MD, Volvo India. Volvo's USP, says he, is that it would provide transport companies a solution, not just heavy-duty trucks. It'll train drivers and mechanics and advise these companies on how to achieve economies of scale during the ebb and flow of freight movement.
But with the market for heavy commercial vehicles on a downslide and at an abysmal minus 52 per cent as compared with the corresponding figures last April, Volvo would find it an uphill drive. Sources in the auto industry say the market for medium and heavy-duty vehicles (9 tonne and higher capacity) plunged to 92,621 last year compared to 1,51,117 during fiscal 1996-97.The preceding two years, 1995-96 and 1995-94, too, were boomtime as sales of these vehicles shot up by 25 to 30 per cent. But industrial production didn't match the boom in vehicles, resulting in under-utilisa-tion of capacity. Besides, the transport industry has acquired only 1,700 trucks with a capacity of 25 tonnes and more, and 500-odd tractor trailers which could ferry loads between 35 to 40 tonnes, during 1997-98.
Sources say TELCO and Ashok Leyland serve the market for heavy-duty trucks and tractor-trailers where Volvo proposes to make inroads. The market for heavy-duty vehicles is extremely small as the unit loads available are also small. "The market is restricted, but Ashok Leyland is present and will continue to serve this segment," says R. Seshasayee, MD, Ashok Leyland, Chennai. He says vehicles of this category ought to achieve high levels of productivity, an attribute dictated by the condition of roads, which ought to facilitate the movement of such vehicles at speeds of 70 km an hour or higher.
How many Indian roads facilitate such movement is anybody's guess. Uppal agrees Indian roads aren't wide enough and prone to congestion, and that to some extent, Volvo's growth will be dictated by the condition of Indian roads. But he's confident of marketing a substantial number of Volvo's heavy-duty tractor trailers, for, he says: "The new-generation transport operators aren't cleaners graduating to drivers and drivers graduating to owners. It's someone who's very good in management, in some cases those who've passed out of business management schools or adept with information technology. We're not talking to more than 250 customers, who're very discerning, and buying 20 to 25 per cent of the trucks in the country. Gradually, we'll wait for others to emulate their example," he says.
Volvo has sold 20 of these tractor-trailers, among them five to Transport Corporation of India, and a couple of other transport companies. The cost of these vehicles range from Rs 22 lakh plus excise to Rs 43 lakh plus excise, depending on the configuration. TCI is pleased with these heavy-duty vehicles as operating costs are low and payload capacity high. While its most expensive model, Puller—at Rs 43 lakh plus excise—can transport loads up to 175 tonnes, Volvo's other tractor-trailers can carry net payloads between 25 and 40 tonnes. But, says F.B. Singh, regional manager, TCI, "the problem is to get a load capacity of 40 tonnes at a time. Such loads are possible only if the market improves. Transporters operating near ports can make profits because the payload capacity is high," he says.
Volvo also has plans of capitalising on the economic advantage to turn the plant near Bangalore into a source base for its global production and distribution network. It'll also commence manufacture of equipment like tip trucks and concrete mixers for the construction sector, besides buses for inter-state and metro passengers. But that's in the future. For now, the plant will roll out a limited number of vehicles with caution being the watchword. It'll take a while to reach the capacity of producing 4,000 vehicles a year. The numbers would obviously be dictated by the pace of recovery of the Indian economy.