Mumbai: Swedish car maker’s Indian arm, Volvo Car India Pvt. Ltd, which sells the S80 and XC90 models in the country, has fallen grossly short of its target for 2008, even while its German rivals Mercedes-Benz, BMW and Audi surged ahead.
The Swedish car maker, acquired by Ford Motor Co. in 2007, had expected to sell 500 cars in India but managed only 100. Managing director for India Paul de Voijs blamed it on delays in expanding the company’s dealerships in the country. “We did not open as many dealerships as we had expected, owing to the exposure to the slowdown in the third quarter. Most of the plans moved to 2009.”
“Moreover, we are relatively new in India and it takes time to understand how the market functions,” Voijs added.
Industry watchers aren’t buying that line. Volvo didn’t do well in India because of its high pricing even for the premium segment, and a branding that leans more towards safety than luxury, many said.
“As a brand, a Mercedes or a BMW has a much higher prestige value than a Volvo, which is identified more with safety and less with luxury,” says R. Venkatraman, partner at consultancy firm AT Kearney Ltd.
Volvo’s S80 model is priced at Rs38 lakh in Mumbai, excluding taxes and registration fees. Compare that with Rs27.6 lakh for the Mercedes C220, Rs35 lakh for BMW’s 325i and Rs30 lakh for the Audi A4.
Neeraj Bandhu, a director at auto consultancy CSM Worldwide India Solutions Pvt. Ltd, agrees. If a person is spending at least Rs30 lakh on a car, they’d rather opt for a brand with a stronger positioning in luxury, he says.
Luxury car makers sold at least 8,000 units in India in last year, a 76% jump over 2007, said Suhas Kadlaskar, director of corporate affairs at Mercedes-Benz India Pvt. Ltd.
The German car maker sold 3,625 cars in 2008, 46% more than in the previous year. BMW India Pvt. Ltd registered a 42% increase, selling 2,908 cars, while Audi India’s sales surged to 1,050 cars from 349 earlier, according to data from the companies’ executives.
Volvo, which entered India in September 2007, has another handicap. While the German car makers have assembling units in the country, Volvo imports its vehicles through dealerships, which adds to the price.
In India, imported or completely built cars attract a duty of 108-110%. Voijs says current volumes are too few to merit an assembling unit.
He expects 2009 to be better for the luxury car market. Volvo plans to launch its premium sports utility vehicle, the XC60, in India in 2009 and appoint more dealers in Kochi, Pune, Bangalore and Chennai.
“We don’t see the market going down at all. On the contrary, we think it’s one of the fastest growing segments,” agrees Venkatraman.
Daimler AG, which makes Mercedes cars, saw a 40% growth in India in 2008, compared with about 10% rise in Thailand, Malaysia, Singapore and Vietnam, Joachin Schmidt, president and chief executive, Eastern Europe, Asia and Africa, said after opening a car and truck assembly plant in Pune on Tuesday.
Sudha Menon in Pune contributed to this story.