Scania to locally manufacture luxury buses from this year

Mumbai: Scania Commercial Vehicles India Pvt. Ltd, the local arm of Swedish truck and bus maker Scania AB and part of the Volkswagen Group, will enter the inter-city luxury bus market from the middle of this year.

The Metrolink range will compete with buses from segment leader Volvo AB, Daimler India Commercial Vehicles Pvt. Ltd’s Mercedes buses and Tata Motors Ltd’s Divo among others. Scania is investing Rs.250 crore to set up a factory that will make buses and trucks near Banaglore.

Scania has been present in the Indian market since 2007 through a distribution partnership with the engineering and construction firm Larsen and Toubro Ltd.

Bus deliveries (imported buses) will start in mid-2013, Anders Grundstromer, managing director, Scania Commercial Vehicles India, told reporters in Mumbai on Thursday. The new facility, which an annual capacity of 1,000 units, will start production in early 2014, he said.

The company will be able to make a saving of about 30% by making its vehicles locally, although that differential may not be passed on.

“It’s not the price but the total cost of ownership, which is important,” Grundstromer said.

The company is exploring options for financing its vehicles. Options include becoming a partner of Volkswagen Group’s finance arm, he said.

The company expects a 20% increase in sales this year from the 100 that it sold last year, said Sivakumar V., director, sales, trucks and buses.

Sales of medium and heavy commercial vehicles contracted 19.1% to 198,079 units in April-December, according to the Society of Indian Automobile Manufacturers or Siam.

Scania doesn’t consider its late entry to be a disadvantage for long.

“We entered Brazil 10 years after Volvo and have 32% share in that market,” said Grundstromer.

Abdul Majeed, auto practice leader at PriceWaterhouse Coopers, said there’s room for another company in the segment, which is expanding. “The value proposition will be critical,” he said.

Grundstromer expects the market for luxury inter-city buses to expand to 5,000 from 1,000 presently in the next five years.

Scania plans to increase employees in India from 40 to close to 1,000 in a year and a half. The Swedish firm, which has dealers in Chennai and Bangalore now, plans to have outlets in the western and eastern regions as well. Kumar said Scania would continue its distribution agreement with L&T for off-road vehicles.