Volvo is the only luxury car maker in India who hasn’t gone the local assembly route in spite of the Indian government hiking import duties in the earlier part of this decade.
Volvo isn’t new to India, it entered the country in 2007 which is around the same time as its arch rivals Audi and BMW (Mercedes was the first mover with a 1994 entry in the sub-continent). Ask anyone about Volvo and most will recollect their buses because of the poor marketing done by the car division of the Swedish brand. While the German trio are aggressive, the Chinese owned Volvo comes across as slow and laid-back, focussing its attention around niche customers like those who play Golf. Naturally Volvo dealers are a very unhappy bunch.
Volvo’s other problem is pricing, it brings its cars via the CBU route and that pastes a big fat duty on its products. While Volvo is aggressive in pricing for some of its models, most Indians don’t like the idea of paying the government an amount equal to the price of the car as CBU models cost double of what they should be priced at. Volvo has been planning local assembly operations since sometime now but nothing concrete has emerged. Setting up its own facility doesn’t seem like the preferred choice for the car maker who focusses high on vehicle safety.
Now Volvo is considering a tie-up with either GM, HM or Mahindra, to utilise their facility to assemble its cars in the country. This is both a cost effective as well as a quick method since Volvo won’t have to set-up a plant from scratch, saving both time and money. However, General Motors is unlikely to welcome Volvo with open arms considering their new found focus on exports, resulting in reduction in idle capacity.
Meanwhile among Mahindra and Hindustan Motors, we would recommend Volvo stays away from both because Mahindra’s history with other car makers has always ended up in a break up (remember Ford, Renault, Navistar, etc.) and we all know how Mitsubishi is close to extinction in India solely because of the Ambassador maker. Instead, Volvo should show an India focus by investing its own money and setting up its own facility because if you don’t have enough faith in your brand to be a success, then neither will customers. The company’s next launch is the highly awaited and much praised all new XC90.
