Q & A
Helene Mellquist, Senior Vice President, Volvo Trucks International
Interview by: Anirudh Raheja
Q. How do you look at the Indian truck market?
A. India is one of the most exciting markets that we have seen. It has good growth potential. Five years back, we penetrated the coal mining market. This was done through a 24×7 operation, and a close relationship on the service side. We have 8×4 trucks that go back and forth all the time. They deal with coal loading and unloading. We provide service support right next to the site. There are one or two mechanics depending upon the site. Efficient and extremely competitive in terms of business operations for the coal mine owners, we have got a strong foothold. We enjoy a strong position there. The market is however minuscule. The heavy duty truck market in India is just 2000 units. It climbs to 3000 units in a good year. Finding a foothold with the premium trucks that we offer, we are looking forward to a position where we can contribute. We do 1,200 units in the (Indian) market. Many things depend upon the legislature and the governments, and what they will do. While the government is investing a good deal in green energy, coal production will be doubled as India is already importing a lot of coal. It will be nice if the Indian coal is put to greater use. It will remain an area of growth for us.
Q. What is happening at the Hosakote plant?
A. We are assembling trucks at Hosakote with local content in them. We do as much as we can, and which will make sense for us from a business point of view. We are looking at new segments after the decision to introduce GST was taken. Developments are taking place in the construction segment. In it, we have seen a couple of breakthroughs at the premium level. This makes sense for Volvo Trucks. Irrigation is an avenue we are looking at. It makes sense for us. Quarrying is another area where we are present in other markets. We are targeting this area in India as well. What is important for us, is to build an infrastructure. Both, India and China, are progressing fast in the area of e-business. China has managed to develop a network of roads pretty quickly. India is still lagging behind. The good news is that India has already chalked out plans for logistics corridors. When such an infrastructure is in place, different subsidies can be given away. Volvo trucking can be a part of this development in India too.
Q. Is the lack of infrastructure a big hurdle?
A. It is. If one looks at the infrastructure today, there are so many trucks standing in a queue on the road. It is not healthy for trucks like Volvo. For Volvo trucks, it is important to clock a good up-time and offer best productivity. The payback period will otherwise stretch for much long. If a tractor is standing still in the city, waiting to get somewhere, then it becomes difficult. Having good logistics corridors is beneficial.
Q. How do you plan to change the perception of a mining truck provider in India?
A. I think it is about competency. We have competence in construction sector the world over. We have competence in particular in the mining markets of the world. It is an essence of what we can provide in the construction industry. For perception, there’s up-time for productivity and product reliability among others for our customers.
Q. Are the lower localisation levels proving to be a hurdle?
A. I think the localisation levels are actually good. We will localise as long as it makes sense in terms of profitability. Volvo Eicher PowerTrain (VEPT) is already supporting Volvo Trucks with engines for its medium-duty trucks. Heavy-duty engines are sourced from Europe. Using such engines in our trucks in India could make sense, but there are investments that have been done with confidence. It therefore makes sense to do them here. As volumes grow, things could change quickly. We are constantly looking at optimising our costs and invest in the best place. A place that will benefit our customers. We can always optimise our production facilities.
Q. What do you think should compel an operator to buy a Volvo truck?
A. Our commitment to keep our trucks on the road, and have them running all the time should compel an operator. We invest in real competitiveness. We had a target of selling 100 units this year on the construction side, and we have already sold over 60 units in first half of the year. It shows that we are already exceeding our targets.
Q. What could you do to push those figures up?
A. We need to sell more. We need to get more people on the ground. We have an internal saying, ‘feet on the ground’. Inline with the saying, we want to be counted upon in the long haul segment as well. We want to, find new segments together with our customers. We want to match up to their expectations with our products in those segments. We want to sell well. We are confident of marketing activities intensifying in the construction segment. We are doing that with our joint venture partner VE Commercial Vehicles (VECV) in India.
Q. Is India’s reputation as a price sensitive market slowing you down since your trucks are premium?
A. We go where we feel that we can provide the best value to our customers. We are where we find the right segment, and where it makes sense. More and more customers in India are realising that is it not just the sticker price that serves. Upon operating a truck over the years, they have come to realise that the total cost of ownership translates into a sensible deal for them. From us, they get a fuel efficient, and safe truck. They get driver training. All these make a good investment.
Q. How is it in Europe?
A. In Europe, our presence is 60 per cent. We have a strong foothold. Our market share in India is minuscule right now. The total market is also minuscule. It is growing nevertheless. We are seeing many other markets go through a similar situation. We are seeing the European segment getting more and more popular. We are offering a product that has a highly competitive lifecycle. This is in comparison to having a cheaper truck with higher cost of maintenance through out its lifecycle. When you talk about construction activities booming, it is not just the number of projects increasing, it is also about the size of the project increasing. With government stipulating the time to finish a project, there is much demand from contractors to increase productivity. This shift has contractors looking for more productive solutions. It is here that the value proposition a Volvo truck offers, comes into the picture.
Q. Would you look at turning your Indian assembly operation into an export hub?
A. We are already doing that with Eicher as a part of our joint venture. As far as the Volvo brand is concerned, there is a need for higher volumes. Before it makes sense to export, we need higher volumes. It is one thing that we constantly talk about internally. We are trying as much as we can. When it will make sense, we will do it.
Q. What are your current levels of investments in India?
A. Volvo Group is present in India through many businesses. We have set up a facility at Hosakote, which is almost 20 years old. We have a joint venture with Eicher, which marks a significant investment for the Group. VEPT is another significant investment. It is the same in the case of on-site service setup where Volvo Trucks is directly involved. Volvo Construction Equipment also has a strong presence. The joint venture with Eicher is one of the few such ventures in the industry that have been successful. Both, in terms of investments and profitability. The collaboration environment that we have is very good. It is progressing very well. The brand positioning of both the brands is complimentary.
Q. India will soon progress to BSVI emission standards. How do you look at it?
A. I think it is an excellent move. We are fully ready for it. As a global company we have to deal with different legislations in different countries. Since we have the technology, we have an edge when it comes to emission norms. We have a competitive advantage. BSVI emission standards will increase the costs. Sophisticated engines will need good quality fuel. The price increase during the move up to BSIV from BSIII has been up to seven per cent. The upper limit is ten per cent. This is not a substantial increase that can topple the customer’s economics. In fact, it is a commitment to the society.
Q. What are the global trends in the trucking industry that you see?
A. When I travel around the world, it is electromobility that comes to mind. The trends are about electromobility, about automation and connectivity. Those I think are the real big trends. We are witnessing a paradigm shift not only in trucking, but in the automotive industry overall. Platooning for example is about automation, and connectivity is so much about software. We have a business unit that works in tandem with all those software companies, collaborates with them, and buys from them depending upon the type and the need for knowledge. The business unit also looks at startups, and the kind of entrepreneurial knowledge that can be had into a big company. Out of four hundred startups, only one will succeed. It calls for constant evaluation. A gold mine could be found somewhere. We scan the market for startups because it would not need us to develop everything in-house. There’s a lot about connectivity, and what one could provide to the customer. A lot is happening in the digital space right now. Our customers could benefit from it. We want our customers to benefit by capturing the beneficial developments in the digital space.
Q. What led to the decision of discarding manual transmission?
A. It was productivity and efficiency of the truck. Today, 95 per cent of our trucks employ I-Shift automated manual transmission globally. Beginning September, we would have stopped the production of manual transmission in Europe. This will be followed by various other markets. We also have powertronics which is completely automatic for very tough operations. In India too, every truck that we will sell will have an I-Shift AMT gearbox. There’s been a strong pull for it from the customers as well. And, this is not just in India. India is in-line with the global trend.
Q. India has been facing driver shortage. Would that compel you to introduce sophisticated technologies?
A. There are two ways to look at the situation. One is that we always provide drivers, training. Drivers of our customers are trained by us. Where ever we deliver a truck, we ensure that the drivers should understand and know how to drive it. We ensure that the drivers are skilled to operate technologies our trucks are equipped with. The second is automation. That is a little away. The possibility is of delivering trucks that can operate with ease in confined areas, without drivers. We currently have in terms of automation, technologies that support the driver, and not what replaces him. Anything beyond is a speculation.