Bangalore: Swedish automobile maker Volvo Buses plans to sell cheaper buses under a new brand next year as it looks to protect itself from a slowing demand in North America and Europe, as well as newer markets such as India.
Volvo will start selling the cheaper buses in India, marking the company’s first-ever move into non-luxury buses anywhere in the world.
“We have decided on a dual-brand strategy for emerging markets. We start in India to go into the value segment during 2014. We have had the product concept on trial for almost 12 months and we have good feedback about the concept,” Volvo Buses acting president Hakan Karlsson told reporters on Wednesday. “India had a high priority (for the launch of cheaper buses). We have created a strong brand image here.”
Karlsson declined to name the brand. The new buses are likely to be priced between Rs.40-60 lakh. Volvo now sells buses only above Rs.65 lakh in India, whereas most buses in the country cost up to Rs.25 lakh.
The market for the cheaper buses over the long-term will likely be about 10,000 units, of which Volvo aims to get 25-30%, said Akash Passey, chairman of Volvo’s India bus unit.
“This is not a game-changer. I don’t think it will be a major volume driver for the company anytime soon because the pricing looks to be a bit steep. Currently, though demand for buses is not as bad as for trucks, it is still subdued,” said a Mumbai-based analyst who declined to be identified.
Volvo Buses, part of the Volvo Group which also makes trucks and cars, has faced declining demand for years in Europe and North America. Last year, the company cut more than 450 jobs and shut a factory to shield profits. In the most recent quarter, the company reported a 22% slump in deliveries to 3,244 buses. In the past year, growth slowed even in India because of a weak economy.
Karlsson on Wednesday said the company has cut its 2015 revenue forecast for India. Volvo said in 2011 that it would reach $1billion in sales in India by 2015. Karlsson said that due to the recent slowdown the company would miss its target.
“India was a bit of a surprise for us. We saw a fairly dramatic drop in growth in the automotive sector over the past few quarters. That gives us a signal that we have to look at our plans and make some adaptations. This could delay our target by one or two years,” Karlsson said.
This financial year, India’s automobile industry is likely to grow at its slowest pace in nine years due to rising fuel prices, a weak economy and high interest rates.
Volvo, which entered India in 2001, sold over 700 units in the country in 2012, an increase of 10% over the year ago. Passey said the bus market in India grew by 3% last year. “At the moment, it looks like a tough year (2013) for the automobile industry. We are hoping the government would take measures during the forthcoming budget to bring in funds into the infrastructure sector, or JNNURM (Jawaharlal Nehru National Urban Renewal Mission), which will give an impetus to the auto industry,” he said.