The Volvo Group is planning to make an investment of Rs 2,000 crore in the next few years.
AM Muralidharan,President, Volvo CE, India.
As a market leader, Volvo CE will continue to invest in new technologies backed by innovation. The mantra behind our success is our innovative way of thinking, active investment in R&D and our close relationships with our growing family of customers and employees, says AM Muralidharan, President, Volvo CE, India. Excerpts from the interview.
How do you assess the current CE market scenario and its growth prospects in the long term?
Even though the market grew for the first six months of 2012 as compared to 2011, we expect to finish the year in a flat market. The industry is experiencing a slump due to a slowdown in the mining industry as well as delay in infrastructure projects due to time and cost overruns. Shortage of funds, environmental concerns and delay in governmental clearances added to this. Project delays have been caused due to land acquisition challenges, in turn causing major investment deferrals by companies. There is also a lack of structured regulatory and policy framework for PPP models which needs to be addressed.
However, the market is likely to pick up by mid-2013 and this is mainly due to the government of India focusing on the infrastructure of this country and planning to invest $1 trillion during the 12th Five Year Plan. The problem in the mining industry is also a temporary glitch and we expect the situation to resolve soon.
Which are the major areas to be addressed on a war footing?
There have been some challenges facing the construction industry, which the government is keen on addressing, for example, delay in infrastructure projects, shortage of funds, environmental concerns and delay in governmental clearances.
The environment is beginning to look up with the government planning to invest $1 trillion in infrastructure during the 12th Five Year Plan. According to reports, the government is planning to set up a panel led by the Prime Minister to speed up approvals for road, rail and port construction, including as much as $18 billion of stalled projects. It has also eased norms for transfer of land for PPP projects, allowing acceleration of infrastructure projects in sectors like railways, civil aviation and ports that are required to boost economic growth.
What is your take on the downward slump in the Chinese CE market?
Though there has been reduction in total market in 2012, the total Chinese CE market is one of the highest in the world. They believe that this will continue for several more years. As the market is growing in India, we need to have sufficient technology and capacity to meet the growing requirement. If global players are able to offer technology and add value to customers, then they should be encouraged.
What have been Volvo's strategies to keep costs competitive?
Volvo CE is one of the most dynamic companies in the industry. Not only have we grown rapidly over the last decade, we have done so without sacrificing the quality of our products, the innovation in our thinking, or our close relationships with our growing family of customers.
As a market leader, Volvo CE has been able to increase market share in key products and markets, as customers preferred the assurance of a dependable and strong brand such as Volvo. And being part of the Volvo Group means that we have been actively investing in technology for the future, even in the depths of the downturn. This will make us a stronger company tomorrow. The decisive actions that we at Volvo CE take now will enable us to emerge stronger, leaner, more efficient and profitable when markets improve. Not only that, our product range will be of a higher quality and better focused and supported. Our recent launches, for example, include a new series of excavators that is more productive and fuel efficient.
The cost of average equipment in India is still very low compared to international market prices. How long will you be able to sustain the same pricing levels?
As we are transforming from labour -oriented construction towards mechanisation, we expect the cost of execution of projects to go up, which will result in better pricing level. Globally, the construction contracts are time-bound and at very good pricing levels. Hence when there is more work to be done, we expect the project pricing to go up and customers profitability to improve, resulting in better pricing for performing equipment with higher output level.
What has been Volvo's core focus on providing value addition to its customers?
In September 2012, we launched the Customer Contact Centre 'V Care,' to help our customers in India achieve higher productivity by minimising their machine downtime. The centre will record and process all customer issues centrally and in real-time, giving Volvo CE the ability to monitor dealership customer serviceability and enable them to resolve customer issues quickly and efficiently. The new centre is an integral part of Volvo CE's objective to offer customers total lifecycle care, from providing equipment to support and partnership, and ensure customer complete satisfaction.
We have also launched our Remanufactured (REMAN) Programme to encourage users to keep their Volvo machines genuinely a Volvo. It allows users of Volvo CE to have their used components renovated to the same condition as new, thus eliminating the scope of environmental damage. This programme aims at creating an eco-cycle and is testimony to Volvo's commitment towards a greener environment.
Volvo also has a robust distribution network. We have been strengthening our distribution network for a long time and that process will go on. As the market is growing we will continue to invest in distribution and help our dealers serve our customers better.
What have been the sales trends for backhoe loaders and excavators? Which sector is expected to drive demand?
Traditionally, the backhoe market has been growing. Recently, we have seen the excavator market above 11 tonne growing faster than the backhoe loader market. According to the Accenture report, by 2015, the excavator market is likely to be the same as the backhoe loader market; we see the trend continuing for excavators.
What has Volvo's overall performance been so far in 2012?
Even though there was a reduction in the size of the total market for construction equipment overall, Volvo CE globally showed considerable growth in the second quarter of 2012, posting a solid set of financial results that saw sales in the three months up 15 per cent. However, in the third quarter, the sales declined by nine per cent and this was mainly attributed to the slowdown in different markets as well as the lowering of demand in the mining industry.
How do you differentiate your product in terms of competition, ease of operation, productivity, energy and fuel efficiency and safety?
Around the globe and specifically in India, Volvo CE is the leading solutions provider for buying dependable equipment. We always develop technology keeping in mind customer comfort coupled with competitive pricing.
Ease of operation, productivity, energy efficiency and safety have been the cornerstones for Volvo to create their machines. Volvo has been one of the earliest pioneers in driving higher fuel-efficiency, and one of the earliest in recognising the environmental issue. We understand that fuel has two adverse attributes to it, one, it costs money and the more an equipment uses, the more expensive it gets; two, fuel consumption creates pollution, and hence the need to make engines even more judiciously. Volvo CE takes a holistic approach to fuel efficiency. We deliver fuel efficiency across all elements of our machines via engines, systems, operator behaviour and future technologies while increasing the productivity for our customers. Hybrid technology is one part of this wider range of fuel saving solutions.
Volvo CE is the first manufacturer to introduce a telematics system called CareTrack in India which allows customers to monitor a machine through GSM connection and provide suitable maintenance suggestions. With CareTrack, a customer gets the knowledge and information he needs to make the right decisions about his machine and thereby increase profitability. The customer can access the information he needs by entering into a password protected website, which gives him detailed information about his machine.
The Volvo diesel engine is at the heart of the company's range of products. Based on well-proven, robust technology, the Volvo V-ACT engine range meets the needs of Indian customers by providing increased machine performance along with reduced emissions, emissions that are ahead of the increasingly strict regulations on exhaust pollutants. Along with environmental improvements, the V-ACT engine also represents new achievements in combustion efficiency and overall engine performance. With new fuel injection, air management technology and advanced electronics, the inherent potential of the V-ACT engine is then tailored by Volvo engineers to meet the specific performance criteria required by differing machine types and applications.
Brief us on Volvo's initiative on skill and capacity development.
An investment of Rs 90 crore was made last year for the expansion and modernisation of our manufacturing plant in Bengaluru that will manufacture excavators to support customers in high growth markets. The investment is also used to customise our 5.5 and 9-m pavers for the India market. We have capacity to meet demands for the next three years.
Volvo also believes in skill development. We have been actively investing in training and competence development to ensure there are trained labour and operators to operate advanced machinery. Volvo has partnered with GMR Varalakshmi Foundation (GMRVF), the Corporate Social Responsibility arm of GMR Group, to offer an Operators Training Course, which will provide free training to under-privileged youth in India to operate construction machinery.
Could you give us details on the recent announcement on investing in India?
Volvo Group is planning to make an investment of Rs 2,000 crore (Rs 20 billion) in the next few years towards R&D, product development, property, plant and equipment spanning the business areas like Volvo Trucks, Volvo Buses, Volvo Construction Equipment, Volvo Penta, and Volvo Financial Services in India.
How do you look at the growth potential?
The construction equipment industry is going to see a change in the coming years, due to change in the infrastructure, construction and mining sectors in India. According to the CII-IECIAL report, from total revenues of $3.3 billion in 2010, the Indian earthmoving and construction equipment market has potential to grow to $22.7 billion by 2020; and grow from over 60,000 units in 2010 to 330,000 in 2020.
Even in the past, Volvo CE has been able to increase market share in key products and markets. As a market leader, Volvo CE will continue to invest in new technologies backed by innovation. The mantra behind our success is our innovative way of thinking, active investment in R&D and our close relationships with our growing family of customers and employees.
As a market leader, Volvo CE will continue to invest in new technologies backed by innovation. The mantra behind our success is our innovative way of thinking, active investment in R&D and our close relationships with our growing family of customers and employees, says AM Muralidharan, President, Volvo CE, India. Excerpts from the interview.
How do you assess the current CE market scenario and its growth prospects in the long term?
Even though the market grew for the first six months of 2012 as compared to 2011, we expect to finish the year in a flat market. The industry is experiencing a slump due to a slowdown in the mining industry as well as delay in infrastructure projects due to time and cost overruns. Shortage of funds, environmental concerns and delay in governmental clearances added to this. Project delays have been caused due to land acquisition challenges, in turn causing major investment deferrals by companies. There is also a lack of structured regulatory and policy framework for PPP models which needs to be addressed.
However, the market is likely to pick up by mid-2013 and this is mainly due to the government of India focusing on the infrastructure of this country and planning to invest $1 trillion during the 12th Five Year Plan. The problem in the mining industry is also a temporary glitch and we expect the situation to resolve soon.
Which are the major areas to be addressed on a war footing?
There have been some challenges facing the construction industry, which the government is keen on addressing, for example, delay in infrastructure projects, shortage of funds, environmental concerns and delay in governmental clearances.
The environment is beginning to look up with the government planning to invest $1 trillion in infrastructure during the 12th Five Year Plan. According to reports, the government is planning to set up a panel led by the Prime Minister to speed up approvals for road, rail and port construction, including as much as $18 billion of stalled projects. It has also eased norms for transfer of land for PPP projects, allowing acceleration of infrastructure projects in sectors like railways, civil aviation and ports that are required to boost economic growth.
What is your take on the downward slump in the Chinese CE market?
Though there has been reduction in total market in 2012, the total Chinese CE market is one of the highest in the world. They believe that this will continue for several more years. As the market is growing in India, we need to have sufficient technology and capacity to meet the growing requirement. If global players are able to offer technology and add value to customers, then they should be encouraged.
What have been Volvo's strategies to keep costs competitive?
Volvo CE is one of the most dynamic companies in the industry. Not only have we grown rapidly over the last decade, we have done so without sacrificing the quality of our products, the innovation in our thinking, or our close relationships with our growing family of customers.
As a market leader, Volvo CE has been able to increase market share in key products and markets, as customers preferred the assurance of a dependable and strong brand such as Volvo. And being part of the Volvo Group means that we have been actively investing in technology for the future, even in the depths of the downturn. This will make us a stronger company tomorrow. The decisive actions that we at Volvo CE take now will enable us to emerge stronger, leaner, more efficient and profitable when markets improve. Not only that, our product range will be of a higher quality and better focused and supported. Our recent launches, for example, include a new series of excavators that is more productive and fuel efficient.
The cost of average equipment in India is still very low compared to international market prices. How long will you be able to sustain the same pricing levels?
As we are transforming from labour -oriented construction towards mechanisation, we expect the cost of execution of projects to go up, which will result in better pricing level. Globally, the construction contracts are time-bound and at very good pricing levels. Hence when there is more work to be done, we expect the project pricing to go up and customers profitability to improve, resulting in better pricing for performing equipment with higher output level.
What has been Volvo's core focus on providing value addition to its customers?
In September 2012, we launched the Customer Contact Centre 'V Care,' to help our customers in India achieve higher productivity by minimising their machine downtime. The centre will record and process all customer issues centrally and in real-time, giving Volvo CE the ability to monitor dealership customer serviceability and enable them to resolve customer issues quickly and efficiently. The new centre is an integral part of Volvo CE's objective to offer customers total lifecycle care, from providing equipment to support and partnership, and ensure customer complete satisfaction.
We have also launched our Remanufactured (REMAN) Programme to encourage users to keep their Volvo machines genuinely a Volvo. It allows users of Volvo CE to have their used components renovated to the same condition as new, thus eliminating the scope of environmental damage. This programme aims at creating an eco-cycle and is testimony to Volvo's commitment towards a greener environment.
Volvo also has a robust distribution network. We have been strengthening our distribution network for a long time and that process will go on. As the market is growing we will continue to invest in distribution and help our dealers serve our customers better.
What have been the sales trends for backhoe loaders and excavators? Which sector is expected to drive demand?
Traditionally, the backhoe market has been growing. Recently, we have seen the excavator market above 11 tonne growing faster than the backhoe loader market. According to the Accenture report, by 2015, the excavator market is likely to be the same as the backhoe loader market; we see the trend continuing for excavators.
What has Volvo's overall performance been so far in 2012?
Even though there was a reduction in the size of the total market for construction equipment overall, Volvo CE globally showed considerable growth in the second quarter of 2012, posting a solid set of financial results that saw sales in the three months up 15 per cent. However, in the third quarter, the sales declined by nine per cent and this was mainly attributed to the slowdown in different markets as well as the lowering of demand in the mining industry.
How do you differentiate your product in terms of competition, ease of operation, productivity, energy and fuel efficiency and safety?
Around the globe and specifically in India, Volvo CE is the leading solutions provider for buying dependable equipment. We always develop technology keeping in mind customer comfort coupled with competitive pricing.
Ease of operation, productivity, energy efficiency and safety have been the cornerstones for Volvo to create their machines. Volvo has been one of the earliest pioneers in driving higher fuel-efficiency, and one of the earliest in recognising the environmental issue. We understand that fuel has two adverse attributes to it, one, it costs money and the more an equipment uses, the more expensive it gets; two, fuel consumption creates pollution, and hence the need to make engines even more judiciously. Volvo CE takes a holistic approach to fuel efficiency. We deliver fuel efficiency across all elements of our machines via engines, systems, operator behaviour and future technologies while increasing the productivity for our customers. Hybrid technology is one part of this wider range of fuel saving solutions.
Volvo CE is the first manufacturer to introduce a telematics system called CareTrack in India which allows customers to monitor a machine through GSM connection and provide suitable maintenance suggestions. With CareTrack, a customer gets the knowledge and information he needs to make the right decisions about his machine and thereby increase profitability. The customer can access the information he needs by entering into a password protected website, which gives him detailed information about his machine.
The Volvo diesel engine is at the heart of the company's range of products. Based on well-proven, robust technology, the Volvo V-ACT engine range meets the needs of Indian customers by providing increased machine performance along with reduced emissions, emissions that are ahead of the increasingly strict regulations on exhaust pollutants. Along with environmental improvements, the V-ACT engine also represents new achievements in combustion efficiency and overall engine performance. With new fuel injection, air management technology and advanced electronics, the inherent potential of the V-ACT engine is then tailored by Volvo engineers to meet the specific performance criteria required by differing machine types and applications.
Brief us on Volvo's initiative on skill and capacity development.
An investment of Rs 90 crore was made last year for the expansion and modernisation of our manufacturing plant in Bengaluru that will manufacture excavators to support customers in high growth markets. The investment is also used to customise our 5.5 and 9-m pavers for the India market. We have capacity to meet demands for the next three years.
Volvo also believes in skill development. We have been actively investing in training and competence development to ensure there are trained labour and operators to operate advanced machinery. Volvo has partnered with GMR Varalakshmi Foundation (GMRVF), the Corporate Social Responsibility arm of GMR Group, to offer an Operators Training Course, which will provide free training to under-privileged youth in India to operate construction machinery.
Could you give us details on the recent announcement on investing in India?
Volvo Group is planning to make an investment of Rs 2,000 crore (Rs 20 billion) in the next few years towards R&D, product development, property, plant and equipment spanning the business areas like Volvo Trucks, Volvo Buses, Volvo Construction Equipment, Volvo Penta, and Volvo Financial Services in India.
How do you look at the growth potential?
The construction equipment industry is going to see a change in the coming years, due to change in the infrastructure, construction and mining sectors in India. According to the CII-IECIAL report, from total revenues of $3.3 billion in 2010, the Indian earthmoving and construction equipment market has potential to grow to $22.7 billion by 2020; and grow from over 60,000 units in 2010 to 330,000 in 2020.
Even in the past, Volvo CE has been able to increase market share in key products and markets. As a market leader, Volvo CE will continue to invest in new technologies backed by innovation. The mantra behind our success is our innovative way of thinking, active investment in R&D and our close relationships with our growing family of customers and employees.
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