Volvo in India

The name "Volvo" needs no introduction in the automobile industry. Quite synonymous with quality and luxury, the Swedish automaker has established a strong presence around the world. As a part of its ambition to increase its sales two-fold, Volvo is considering setting up a manufacturing plant in India.

The Indian car buyer today is wealthy and can afford niche cars that were once considered quite out of reach. According to sales figures, players such as Mercedes, BMW, Audi and Volvo together sold about 28,000 premier luxury cars in India last year. While the car sales in the US and Europe have taken a turn for the worse, it’s boom time in emerging markets such as those of China and India. It is therefore no surprise that many international auto manufacturing giants have chosen to set up production units in the country.

Volvo sold close to 820 cars in 2012 in India and is hoping to increase the number to 1200 this year. With a target sales number of 20,000 cars per annum by 2020, Volvo understandably considering setting up a manufacturing plant in the country. According to Volvo, the plans are still in progress and will be finalized once the feasibility study conducted by the company's internal group submits its report.

As the company projects to increase its global sales of 440,000 units to 800,000 units by the year 2020, it makes sense to set up a manufacturing facility in the emerging economies to control costs and increase profitability. Even as the company decides on the location for the manufacturing plant, Volvo is expanding its market base in the Indian automobile market by setting up newer dealerships. The latest in the line of its many dealers has been appointed in the Indian state of Gujarat and aims to sell about 150 units this year through the dealership.

As with most other cars, pricing plays an important role in the ultimate decision of the buyer. Even though Volvo is one of the most desirable brands owing to its superior quality and safety standards, Indian buyers often shy away due to the higher prices. The price of Volvo cars continues to remain high as they are imported as completely built units (CBU). As most other competitors in the luxury car segment have set up plants to partly assemble their cars, they offer the crucial price difference, giving them a greater share of the market. Thus, setting up a manufacturing plant in India would allow Volvo to price their products more competitively and gain more customers.

Manufacturing plant or not, Volvo has switched to an aggressive mode to market its products in India. The company plans to launch the Volvo V-40 Cross Country in India by the end of March this year. The Volvo V-40 Cross Country is one of the most affordable cars and was recently launched in Paris some months ago. The Volvo luxury busses should not be confused with the Volvo cars as it is a separate company that already has a manufacturing plant near Bangalore in Karnataka, India.

As the competition in the Indian automobile market increases despite the slow growth in sales, it is good time for Volvo to establish a base in India, maximize its returns and meet its targets.