Olof Persson, President of AB Volvo and Chief Executive Officer of the Volvo Group, spoke to Dearton Thomas Hector about the Swedish company's India and global strategy during his recent visit to India. Edited excerpts:
Earlier this year, your India MD said Volvo would invest Rs 1,000-1,500 crore in India over three years. What's the rationale for this investment?
If you want to be part of a market like India, you need to invest in the market. We have been in India for 15 years now and are present with almost all our business areas. We have trucks, construction equipment, buses... You need to invest to be a part of the market. The Volvo brand, the Volvo company and our joint venture with Eicher, which needs investments. If you look at the total investments, it is quite a substantial amount of money we are investing in India. Approximately Rs 20 billion on the Volvo side and, I think, Rs 18 billion in the joint venture. That is for facilities, products, R&D, everything. We are investing in a production facility. As you know, we have announced that earlier, for engine manufacturing.
One very interesting thing. For the first time for a new product - our medium duty engine - we reversed the process. We have always developed in Europe or in our traditional markets and then moved technology. Now, we will do the reverse. We (will) develop in India, then we are going to export that product. The hub for the medium duty engine for the Volvo group will actually be here in India.
Volvo says it is looking to increase annual bus sales in India from about 1,500 units now to 2,500 next year. How do you propose to achieve that?
We have a very strong brand for trucks, buses and also construction equipment. Utilising that brand is something we are going to focus on. We believe that there is an opportunity to raise market share and our presence in the market. If you take the Eicher brand, for instance, we have been very successful together, working very closely to increase market share, both for buses and heavy-duty trucks. The Volvo group, including Eicher, is the third largest commercial vehicle manufacturer in India. That gives us a very good foundation to develop our position in the Indian market - with new products, new services and so on.
Globally, your profits seem to be on the decline (net profit has dropped from 3.8 billion kronor - $568 million - in Q3 of 2011 to 1.3 billion kronor - $194 million - in Q3 of 2012). Is this only because of the European crisis?
What we have seen in the third quarter is uncertainty. In Europe. In the US. In India and China... There was a slowdown in activities during the third quarter. So, we adapted our production capacity to have output corresponding to these markets. We are now looking at a 2013-2015 strategy, where we have a number of activities focusing on profitability. We want to have an organisation that reacts fast to markets, because we are in a very cyclical market around the world.
Do you see a fall in demand in Asia?
If you look at Asia in general, the long-term prospects are very good. You will have ups and downs - it is a cyclical industry. But we see good prospects and that is why we invest heavily, especially in the Indian market, in order to grow over the long term. Our strategy is to continue to invest in markets regardless of short-term ups and downs. We believe that the long-term trend is positive.
Are you betting big on Brazil?
We have been in Brazil for many, many decades. We have been investing in our own factories. We have been in Brazil with only one brand, the Volvo brand. We have decided to add another brand. We haven't yet decided which one, but we will add another brand to better capture the whole market. On the construction side, we are already in Brazil with the Volvo brand and also with our Chinese partner brand, SDLG.