Bangalore: Volvo Bus Corp. on Thursday said it will invest Rs 400 crore over the next five years in India to meet its stated goal of manufacturing 5,000 buses in the country by 2015, or one-sixth of its targeted global production of 30,000 buses that year.
Volvo’s India unit will use the money to increase capacity at its plant in Hoskote, near Bangalore, to 2,500 units from 1,000 today, and set up another plant with the same capacity at an unspecified location, president and chief executive officer Hakan Karlsson said.
A file photo of a Volvo bus plying on a regional route
The money will also be spent on research and development for an “Asian product range” catering to what Karlsson called the upper end of the mid-segment market. These buses may also be exported to South America, South-East Asia and Africa.
Akash Passey, managing director, Volvo Buses India Pvt. Ltd, said mid-segment buses cost around Rs 50 lakh, or about 30% less than Volvo’s premium range costing between Rs 70 lakh and Rs 1 crore. He said half the 5,000 buses the company wants to produce in 2015 will be mid-segment. “We practically created the premium luxury bus segment in India. Now we are also looking to tap into the mid-segment opportunity,” Passey said, adding that the buses will roll out in a couple of years.
It’s a good time to make these investments as the demand for bus connectivity will go up in India, said Abdul Majeed, leader of automotive services at consulting firm PricewaterhouseCoopers India.
“In addition, it is good to target more than one segment in a country like ours, as catering to only the premium segment would entail a greater amount of risk,” he said.
Volvo is marking its 10th year in India. In 2008, it invested Rs 100 crore in a 70:30 joint venture to set up the Hoskote plant. In October 2010, it said it was acquiring its partner Jaico Industries’ stake in the venture.
It also said it will invest Rs 100 crore in capacity expansion at the plant, which is now a part of the Rs 400 crore plan announced on Thursday.
The plant’s capacity will be ramped up to 1,200 in two months, and it will hit 2,500 units in two years, Passey said.
Volvo has sold 5,000 buses in India so far, Karlsson said. Passey said the company sold 560 units last year, and hopes to sell 700-800 this year.
Of the projected 30,000 buses in 2015, half will be made in Asia, with 10,000 coming from China—where Volvo’s current capacity is 3,500. The company produced about 12,500 buses globally in 2010, and plans to touch 15,000 this year.
Karlsson said Volvo’s market share is 22% in North America, 8% in South America, 12.5% in Europe, and 5% in Asia. The Asian bus market, he said, was about 130,000 buses this year.
Passey said the company plans to become a $1 billion company in India by 2015 and enlarge its workforce to 5,000 from 1,000 today.
Volvo introduced hybrid buses—that run on diesel and can be electric—last year, selling 300 units in Europe. A smaller number has been sold in South America. These buses were on trial in China, Karlsson said. He said the company could introduce these expensive buses in India by next year if there were buyers.