In a surprise move, Volvo Buses India has merged with VE Commercial Vehicles (VECV).

Story by Deepti Thore

It was in 1996 that Volvo entered India with an intention to manufacture trucks that would be many generations ahead of the trucks available in the market then. The trucks that rolled out of the Hosakote facility on the outskirts of Bangalore stirred a change. It was nothing short of a revolution. The bus business of the company followed almost a decade and a half later. It shared the Hosakote premises with the truck business and started rolling out the famed B7R 12 m rear engine bus to a public that was used to front engine buses. Leaving for some attempts to introduce modern rear engine buses in India like the Neoplan low floor model by a Pune-based company, the Indian masses were oblivious to how far buses have grown in technology, comfort and safety.After leading the top end of the bus market in India through a variety of rear engine bus models including a hybrid city bus, Volvo Buses India has called it quits. In a recent announcement, which surprising comes against Covid-19 situation and an economic environment that is said to be the most difficult after 1979, has it that the Volvo Buses India has merged with VECV’s bus business (they make front-engine buses for inter-city, staff, tourist, school, etc.) to form a new business vertical that would be headed by none other than Akash Passey, Senior Vice President, Region International, Volvo Bus Corporation and also Senior Executive Advisor to the Swedish India Business Council (SIBC), Stockholm. With another premium bus maker Scania having come to India and left, perhaps not finding this market lucrative and against the deep restructuring of the CV business at Volkswagen Group, the departure of Volvo Buses in spirit at least from India does not bode well for the modernising Indian the bus market. Not after establishing the modern standard for buses in the country, both at the inter-city and the city level.

Akash Passey, Senior Vice President, Region International, Volvo Bus Corporation

Coming at a time when the bus operators in India — private and public, are experiencing much distress, the merger of Volvo Buses India with VECV’s bus division to form an all-new vertical under VECV springs many questions. The most important is, would India miss exposure to modern, technologically advanced, safe and comfortable buses hereafter? It will take a while before the all-new business headed by Akash Passey begins to make its presence felt. It is expected to profit from the coming together of people from Volvo and VECV, which has had a joint venture with Volvo for trucks and engines. The sharing of their knowledge and expertise is expected to lead to new achievements and products that will be tailored for this market. The all-new business is also expected to ensure that the existing customers of Volvo and VECV get access to elevated standards of service and care.

To operate the existing Volvo Buses India facility at Hosakote and the VECV facility at Baggad near Pithampur, the new bus business vertical headed by Passey as its President is expected to have as much involvement of Volvo Bus Corporation if not more. The transfer of Volvo Buses India has been debt-free, according to Passey and Vinod Aggarwal, MD & CEO, VECV. Acquiring the Volvo Buses India business for over Rs.100 crores, according to the filling by VECV to the National Stock Exchange, the all-new bus business vertical will offer the widest range of transport solutions to its customers. To usher a new order in India’s bus industry, the merger transaction is expected to close in the next two months, according to Aggarwal. Of the opinion that rather than exit the Indian market, Volvo is further strengthening its position in this market, Passey mentioned that his relocating to India to head the new business vertical as part of VECV would result in better reach and exposure for Volvo as well as Eicher buses.

 

A new horizon

Certain to create a new horizon is the all-new bus business vertical at VECV. Manufacturing, assembling, distributing and selling premium rear engine Volvo Buses in India at one end, and manufacturing, distributing and selling mass-volume front engine Eicher buses at the other end, the all-new bus business has the potential to unleash many new possibilities. Safeguarding the interest of its existing customers, the new enterprise, coming alive in a dynamic Indian market environment backed by urbanisation, e-mobility and connectivity, will help maximise synergies and capitalise market opportunities. It will help volume growth as well by offering products and services that are complementary with Volvo Buses’ core product portfolio in select international markets. The all-new enterprise under VECV will absorb over 500 Volvo Bus India employees. The VECV already has between 12000 to 15000 employees. A creator of modern front and rear engine buses, the new entity under Passey will cater to heavy, medium and light-duty buses requirements, provide packaged solutions to private companies or institutes, and further strengthen VECV’s position as a bus maker.

Apart from strengthening Volvo and Eicher bus positions in India, the new entity, under VECV, is expected to unleash new synergies. Announced Aggarwal, “VECV will be able to leverage synergies in the areas of product development, purchasing and manufacturing with access to Volvo Group’s world-class bus technology.” He mentioned further, “VECV’s strong presence in the Indian bus market with Eicher branded buses will be complemented by Volvo Buses’ prominent position in the premium bus segment.” Drawing attention to the strong mutual trust and win-win ways of working between Volvo and Eicher, Aggarwal averred that the 12-year old VECV joint venture is a testimony to it. With collaborations the order of the day in the auto industry, the new kid on the block, the all-new bus business vertical, already has many factors working in its favour or it seems. Much would depend on how the VECV drives it forward with its understanding of the Indian customer mindset and the working of the local supply chain as the service network. Least said, VECV is already instrumental in helping the Volvo Group to source parts from India and base engines as well through VEPT.

Synergies

In terms of synergies, the experience of Volvo Group has helped VECV to turn out BSVI CVs in the Indian market. It helped VECV from the manufacture of EuroVI engines for the last eight years at VEPT, a joint venture between Volvo and Eicher at Pithampur. VECV is also a manufacturing hub for a UD light-duty truck model in India. The new Eicher Pro 2049 is expected to be exported as a UD light-duty truck to the Far East Asian markets very soon with EuroVI technology to boot. With the new bus entity under its wings, VECV, as a CV major with a modern truck portfolio of between 4.9-tonnes and 55-tonnes, and a modern bus portfolio of over 150 models, stands to gain a good deal, in terms of synergies as well as an ability to flex its muscles in the tough domestic market as well as new export markets.

Getting better at exploring Volvo’s reach in new export markets, VECV with the all-new bus entity under its wings, looks better poised to beat the cyclicity of its home market. It also looks better poised to save itself from the unprecedented developments like the pandemic that could result in severe distress for its customers’ almost overnight. Through the eyes of Volvo, and as Passey mentioned, Volvo Bus Corporation stands to gain better access to the Indian market, which all these years has been amounting to the sale of 500 buses per year on an average. This year has been perhaps the most dull for the Swedish bus major. It is therefore ironic that such an arrangement with long-term effect has come to happen now, at this juncture. Said Passey, “Going forward, customers and partners can expect the same high level of customer care and world-class products from both Volvo and Eicher brands.”

The journey

First to introduce a true bus chassis in India, according to Passey, Volvo Buses India has had an exciting journey in India. Not to be held back by the arrival of global competitors like Scania, Volvo Buses India was instrumental in the introduction of mid-premium brands like UD in India. Some 30 UD city buses continue to operate in the Hubli-Dharwad BRTS at present. Some UD buses are said to be operating in a few other cities too. The Volvo brand of low-floor 12 m city rear-engine premium city buses, including the hybrid ones, enjoying patronage in over 30 cities, Volvo Buses India has been successful in increasing its reach despite the price disadvantage against many customers’ social upbringing. Where Volvo Buses India proved to be the most successful was in the private inter-city bus space with its B7R, B9R and B11R. These buses were lapped up by some of the most dynamic public undertakings as well. In all, Volvo buses in India have covered over three billion kms in the last 20 years. They are found plying through almost every major city and town in India, with 400 plus operators and 70 plus service centres.  More than one million plus commute daily on Volvo buses, according to Passey. “A leading name, when it comes to the public and coach transportation, Volvo Group feels privileged to have triggered the modernisation in a way by introducing the first modern bus on the Indian roads in 2001,” he quipped.

Safety and modernisation

With Volvo Buses India merging into VECV’s bus division to form an all-new VECV bus business, it needs to be seen what changes take place in terms of further modernisation, safety and technology. With competitors like BYD eyeing a larger share of the market through their technological prowess, for legacy bus manufacturers like Volvo and VECV the battle lines are clearly drawn. As part of the merging of Volvo Buses India with VECV’s bus business to form a new vertical sans any transfer of debt, VECV, it is clear, is looking at shaping the Indian bus industry in its favour. It is confident that it will succeed. Explained Aggarwal, “The new venture will help generate opportunities for both Volvo and Eicher as the future unfolds.” With Volvo buses known to clock up to 10 lakh kms or even more without major repairs, and do 25000 kms worth of travel in a month, the new enterprise under VECV has its work cut out with the long-term prospect of the Indian bus market said to be highly positive.

The presence of Eicher buses in the staff, road permit segment and various other mass-volume segments as mentioned above, should present Volvo an opportunity to explore new avenues and increase Volvo Bus Corporation’s reach to have a win-win position to look at. If Aggarwal is to be believed, the future holds a lot more possibilities and new opportunities in new segments. Currently, the Indian bus market is nursing a deep wound. Wounds that may take a long time to heal. Wounds that may reset new segment equations like electric buses despite the encouragement of the government. The road ahead clearly does not look smooth or unexciting. Passey is well aware of it. Mentioning that the current market dip is serious but temporary, he averred that the Indian bus industry is amongst the top three in terms of volume globally. Over the coming years, he opined that the bus industry will undergo big transformation on the basis of rapid urbanisation. “A very clear need in India is for acquiring sustainable solutions as the demand for good quality bus travel rises,” he quipped.

Vinod Aggarwal, MD & CEO, VECV

Challenges

With efforts pouring in the direction of newer mediums of transport like metros and bullet trains that cost far more than it would cost to set up or modernise bus operations, the factor of bus transportation (or road transportation) seems to pale in comparison. The grandeur of a metro or a bullet train is too big to be missed. In comparison, an efficient BRT network like the one at Hubli-Dharwad does not get such brownie points. Neither does a modern Volvo B11R plying between Bangalore and Jodhpur. Amid challenges big and small, the bus market in India is poised to thrive. Thrive it will, and evolve. Expressed Passey, “To successfully serve the Indian customers for future we shall require access to globally relevant technologies. We will require high local agility.” “Through the new business arrangement, we will progress,” he added. While Eicher would look at strengthening and modernising its LMD(light and medium duty) product portfolio and drive deeper into the heavy-duty segment, Volvo would look at digging deeper into the premium bus segments. It would do so by further localising. One of its buses already uses an engine manufactured at Pithampur. Some such new arrangements could be put into practice.

Already distributing Volvo trucks in India, VECV, through this development is set to gain a good deal in terms of technology, knowledge, expertise and market positioning. How it leverages them to carve out a niche is what will matter most. Explained Aggarwal, “With the Covid-19 pandemic and the social distancing norms in place, the need for public transportation buses and intercity coaches will rise.” “There will be higher demand to fulfill the capacity gap,” he concluded.

 

 

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