I have been watching the growth of Volvo’s Bus Division in India from the time it first launched its B7R intercity buses in 2001. Mr. Ulf Nordqvist, the then Managing Director of Volvo’s Indian operations, had this to say this at the launch of Volvo Buses in India in 2001: “We expect to see buses from Volvo to become a motivation to travel and the means to bring cities and people closer in India. This is possible when a passenger begins to consider travel as a pleasurable and safe experience as against being a matter of distance and fatigue. Volvo is entering a promising market with a modern bus concept, and I think our buses will have a role to play in India”.
Volvo has managed to bring in much of that change, and after selling over 1,600 buses in the last seven years, the company has taken the next big step of establishing a facility for manufacturing buses. This clearly shows Volvo’s commitment to the Indian market and its customers. And to head this business the company has chosen Mr. Akash Passey, who in many ways has been the face of Volvo’s bus business in India.
Volvo Bus Corporation has set up a state-of-the-art manufacturing facility in Bangalore for building bus bodies. The new entity, Volvo Bus Body Technologies India Private Ltd. (VBT), is a 70:30 joint venture between Volvo Bus Corporation and Jaico Automobiles.
“As we have driven the change in the bus industry in the last seven years, we will now set new benchmarks in the bus segment by offering world class quality products, a strong distribution network and an unparalleled service set-up that together will lay the foundation for our growth in India. We will be the single interface for all customers regarding manufacturing, sales and service, and this will boost the customer confidence. We will start to play a different role in taking the Indian bus market to a more matured platform”, says Mr. Akash Passey, Managing Director, VBT.
The new bus manufacturing facility was inaugurated on January 31 last by Mr. Hakan Karlsson, President of Volvo Bus Corporation. The new facility has been set up at an investment of Rs. 80 crores and will have the capacity to manufacture 1,000 buses. With this Volvo gains a base for production of complete buses for India and other growing markets in Asia.
Announcing the company’s plans, Mr. Hakan said: “With Asia’s commercial vehicle market growing at an exponential rate, we see VBT playing a central role in fuelling the company’s future growth across region. India has been identified as an export hub, and we have set up the most modern manufacturing plants with strong capabilities that can drive sustainable profit and growth for us. The traffic situation in the steadily growing cities in the area is an increasingly greater problem and this increases the demand for modern buses and efficient bus-based mass transit systems”.
Volvo buses were first introduced in India in 2001. The company started its Indian operations by assembling the chassis at the Volvo India plant, and bus bodies were built at Jaico Automobiles as per Volvo’s design standards. Jaico has added substantial value to Volvo’s bus business in India. The new bus facility will increase flexibility with regard to production capacity and to further improve quality. The chassis for the new buses will continue to be built at Volvo India and the bus bodies will be built by VBT.
Up until the first Volvo bus came along with the true bus chassis, typical buses were all built on a truck chassis. It was only the body-type that determined the league in which one operated in. Volvo has successfully led the changes in bus transport, with high end rear engine buses, built on “true bus chassis”. Volvo has contributed to the overall development of the standards of city and intercity transport in India and has successfully brought about a paradigm shift in the perception about bus travel in India.
New manufacturing facility
Volvo has established the new facility on a 40,000 sqm plot of land with a built-up area of 13,000 sq.mts, adjacent to its existing truck facility at Hosakote. The plant will have capacity to manufacture 1,000 buses annually. For the first year the company is targeting sales of 450 buses which is a 125 per cent increase compared to the 2007 sales of 200 buses. The company’s capacity is already booked for the first six months.
Says Mr. Akash: “We hope to achieve the volume of 1000 units by 2010. We currently employ about 600 employees and would employ over 1,000 people by 2010. We handed over the first nine buses produced in the new plant to our customers and the new design Volvo 9400 coach was showcased for the first time”.
“We feel that we have taken the right step in the right direction. The response has been absolutely encouraging. We had a gathering of 600 people from the bus industry with over 80-85 per cent of the customers from all over India attending the inaugural function personally. We had the management team Volvo Bus Corporation, and that shows the interest and commitment to the Indian market. The state-of-the-art facility boasts of some of the best manufacturing technologies and follows the Volvo Bus Production Principles. The plant adheres to Volvo’s core values: Quality, Safety and Environment that would drive the company to becoming a market leader in the coming years”, adds Mr. Akash.
Mr. Erwin Saey, Industry Manager, VBC, observed: “We have taken some of the best aspects of Volvo’s global plants in Poland, Mexico and Finland and put them together in the new plant. Volvo has for the first time adopted lean manufacturing systems in this new plant. The plant has been built as per international standards and is more process oriented following the Volvo Production Principles. The high end technologies are put in place by a team of highly trained professionals who have gained hands-on experience at the Volvo facility in Poland”.
VBT has set up a completely new assembly line, with jigs and fixtures and CNC bending machines. The company has been investing heavily on improving the quality of welding, treatment of material to prevent corrosion, final finish by installing a dust-free paint shop and the quality of the fit and finish inside the buses. These are areas of improvement which will differentiate the products offered today from those being sold have been selling so far. The company is confident of providing world class buses to its customers.
Components
For buses, the complete driveline which includes the powertrain, transmissions and axles is imported directly from Sweden. The company will continue to import these critical components as the current volumes don’t justify setting up of a manufacturing facility in India for engines or transmissions. The company has indigenised most of the components for bus manufacturing. Thanks to the vendor base that was created by Volvo and Jaico for building buses in the last seven years, these vendors will supply to VBT as well.
Talking about the buses to be manufactured, Mr. Akash said the company plans to launch the Volvo 9400 inter-city bus in the Indian market. It is currently selling the B7R model for intercity application and B7R LE for city bus application. B7R was the model launched seven years back but the model has gone through lot of changes and what Volvo sells today is the 3rd generation B7R which is a lot different from the earlier models.
By establishing a legal entity and by setting up a manufacturing facility, VBT will offer some clear advantages for its customers.
In India, traditionally a bus operator would buy the chassis from a vehicle manufacturer and send it to another company for building the bus body and later get it serviced from a dealer or service centre. The customer will have to deal with multiple entities, and this usually causes confusion for customers.
“In the Indian industry we saw the need for a single customer interface for manufacturing, sales and service. So it is with this in mind that we have created VBT which will be a single interface for the customer. This will create lot of trust in the minds of the customer and will help in providing the effective solution under one roof”, said Mr. Akash.
Superior quality and finish
As stated earlier, Volvo has made significant investments in setting up the manufacturing facility. Through this facility, the company will be able to offer better quality and finish for its products, particularly in areas like welding, painting and interiors.
Volvo is also expanding its service network. Currently it has 40 service points for both its truck and bus business spread across India. Service and availability is an important area which the company plans to focus on. There are plans to add a few more service facilities this year and to set new standards on customer responsiveness.
Factors fueling growth
The Indian bus market will witness significant growth in the coming years. According to Mr. Akash, the inter-city segment will continue to grow at 10-15 per cent annually. Many Indian cities do not have any organised public transport system. Even after 60 years of Independence, only about 20 cities have some kind of urban city service. So far, bus-based systems have been neglected in the country. But with newer technologies and increased availability of technology, India is at the cusp of developing highly successful urban mass transport systems.
The Government is taking up the BRTS under the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) as a cost-effective solution for providing high quality public transport service in urban areas. At present, BRTS is being taken up in eight cities, namely, Pune’s Pimpri-Chinchwad belt, Ahmedabad, Indore, Bhopal, Vijayawada, Visakhapatnam, Jaipur and Rajkot, involving a length of 310 km and an outlay cost of Rs. 2,740 crores. More such projects on public-private partnership basis are needed to strengthen the public transport system in the country. Delhi is also implementing BRTS as a State Government-funded project.
An effective public transportation will ease much of traffic congestion on roads. A classic example is London’s bus network, the most comprehensive bus system in the world. Usage of buses in London has increased 75 per cent in the past 15 years while there has been an increase in car ownership from 48 per cent in 1971 to 65 per cent in 2001.
In India, we have seen total breakdown of infrastructure resulting in traffic congestion in cities like Bangalore. BMTC has introduced Volvo low-floor city buses. An independent study has found that more than 70 per cent of the travellers on these buses were previously using a two-wheeler or four-wheeler. This has helped ease traffic congestion on roads.
Mr. Akash observes: “We want to position ourselves as a complete solution provider. Apart from selling our buses, we would like to play a more advisory role in developing a reliable public transport systems to suit Indian cities. We are a global leader in the bus segment, and we have helped establish some very successful systems in place in markets like South America and Europe. We would like to share our experience in various markets with the transport corporations, thereby playing a much larger role in the development of public transportation system in India”.
Competition
The Indian bus market is going through a major transformation. The entry of Volvo set a new benchmark in bus travel. This has forced Indian domestic manufacturers like Tata Motors and Ashok Leyland to upgrade their product offerings. Earlier, Tata Motors was not so strong in the bus segment, but in recent years the company has revamped the bus portfolio with its Starbus and Globus range, and is setting up the world’s largest bus manufacturing plant jointly with Marcopolo. The DTC order for 525 buses was a shot in the arm for Tata Motors’ bus business. The company is also working with Hispano, the Spanish firm which it acquired a couple of years back, for high-end luxury buses.
Ashok Leyland has always been a strong player in the bus segment. The company continues to do well both in the luxury bus and city bus segments. Very soon it will launch the high-end luxury bus model, Luxura. In the city bus segment. The company has developed the i-bus which was showcased at Auto Expo.
International bus manufacturers too have announced plans for the Indian market. Mercedes has already announced its entry into the bus segment in a tie-up with Sutlej, which will build the bus bodies. Isuzu has a technical tie-up with Swaraj Mazda, and the first few buses from the venture are already on the road. Scania has also announced its plans to enter India and a few more European and Asian bus manufacturers are keenly interested in the Indian bus market.
All this will result in the bus market clearly moving to the next level. The quality, finish and performance of the buses will be the key determinant.
Conclusion
Volvo as a corporation has been steadily expanding its operations in India. In the bus segment, it has set up a separate legal entity and a manufacturing facility for building bus bodies. It has signed a letter of intent with Eicher Motors for expanding the truck business in India. The construction equipment business, which is again a very successful business unit for Volvo in India, has acquired Ingersoll Rand globally and this has provided Volvo India with a manufacturing facility in Bangalore for construction equipments. Volvo also has a strong industrial engines business.
All Volvo products, be it the tipper, bus, engines or construction equipments, are positioned on the high end of the market both in terms of pricing and performance. All products have set standards in their respective segments, in terms of quality and performance. Volvo has been advocating the concept of total life-cycle cost wherein the initial investment could be high but the total cost taking into account the productivity, performance and maintenance during the life of the product is far superior to competition.
In fact, Volvo Bus Corporation has announced that the Indian manufacturing facility will not only cater to the domestic market but also to the Asian, African and Middle East markets. This is the long-term plan, but the for the present “our focus will be on the Indian market, and will look at exports from the next calendar year”, adds Mr. Akash.
With all these developments, India figures as one of the key growth markets for Volvo globally. Volvo Corporation entered India more than a decade ago, being the first one among its European counterparts to do so. The next few years will see Volvo emerge as a major player in all the product segments in which it operates, particularly in the bus segment.
Toyota Kirloskar Motor Private Limited (TKM) announced that TOYOTA MOTOR CORPORATION (TMC) has decided to build a second plant on the site of TKM. The company plans to begin operations of its second plant in 2010, a facility having an initial annual production capacity of around 100,000 vehicles, with plans to increase that over time. In line with this, the company plans to further invest approximately Rs. 1,400 Crores (approximately USD 350 Million).
