It’s difficult to zag when every bone in your body says zig. But it’s precisely this strategy that helps leaders in any industry to stay ahead of the pack. Volvo Auto India may prefer to stay away from the numbers game in the Indian automobile market, but it wants to bring the brand back into the limelight by treading a course different from the rest. At a time when most car manufacturers seem to be launching new cars every second month or upgrading existing products, it plans to stick to its one-new-car-a-year strategy for the next few years. In a recent interview to Rajarshi Bhattacharjee, Tomas Ernberg, managing director, Volvo Auto India, explains the company’s India strategy.
How has Volvo Auto India changed following the change in ownership and new management taking over?
For the first time ever, we are a stand-alone company. We now have an owner who doesn’t interfere much in the business. We were a little unsettled in the Indian market earlier. Also, because of the financial crisis worldwide, Ford wanted to focus on the home brand. The new ownership has a more long-term vision for the brand in India, and aims to turn Volvo into the world’s most desired luxury car brand. This has given Volvo a new motivation.
Last year we also saw a lot of Volvo executives traveling to India, and going through brain-storming sessions. We invested time and effort understanding the Indian market and consumer mindsets. We also spoke to Volvo trucks and buses in India for their experience and business insights.
We have significant investment plans for India. Presently, we are doubling our physical offices space, changing our marketing strategies, increasing marketing budget by 2.5 times and much more. Our aim is to see Volvo grab a share of 15 per cent market share in luxury segment by the year 2020. This is an ambitious plan considering that in 2011, we were 1 per cent of the luxury passenger car segment of India. This means an estimated sales of 20,000 cars by the year 2020.
But increasing production is just one part of the story…
One of our key strategies is to grow our network in India. Today, we stand with seven dealers in eight locations of the country. For the past few months we have been receiving daily enquiries from companies and private people who want to become Volvo dealers/franchisees in different parts of India. We could open up 10 new dealers in the next two-three weeks. But that’s not what we want to do. We want to increase our network but we will do it our way by identifying the right partner in the right process for our long-term goals. We are taking our time. We have identified three more locations Bangalore, Ahmedabad and Delhi-NCR to expand.
The second part of the strategy is to raise the brand awareness. Among the range of engagements is organising the Volvo World Golf Challenge which takes place in 26 countries of the world. Volvo has been associated with golf since 1988 and the Volvo Golf Challenge is something that no other car brand has. It is different from the point that the tournament happens in different parts of the world and we take the winners to the world finals. Golfers and people who love golf know about this and are crazy about this challenge. The other is our association with Lakme Fashion Week in Mumbai, where we are the car partner. As such, our brand awareness strategy includes pumping in more money into traditional marketing, hoardings and other form of advertising. We are also investing in Information Technology so as to integrate our dealer network, monitor them and increase our conversion ratio.
Our strategies for India also include offering more products. We have four products for India now and have plans to launch the fifth car by the first quarter of next year. From the head quarter’s standpoint, there is a lot of emphasis on the product. We are going to launch one car every year for the next three to four years.
At a time when most car manufacturers seem to be launching new cars every second month or upgrading existing products, why do you want to stick to this one-new-car-a-year strategy for the next few years? Is it possible to go slow and stay top of mind at the same time?
The car(s) you are referring to here belong to completely different segments. Volvo is, and will continue to hold its ‘luxury’ positioning. If you look globally, Volvo Car Corporation is 1 per cent of total industry. We don’t produce five cars every year. We don’t have that capacity. We have two factories, one in Belgium and the other in Sweden, and have an assembly plant in Malaysia. We are working on two more factories to be opened in China - the first among the two is likely to be completed by the summer next year. Volvo will never be selling 5 million cars. Our global target for the year 2020 is to roll out 8 lakh cars.
What role does technology play in your overall strategy? Volvo has been focusing on fuel-efficient engines on next-gen platforms. Is it because you see a more lucrative market for fuel-efficient cars in India?
Our CEO Stephen Jacobe mentioned in one of the last motor shows in Europe that our core value is life. We take a lot of care in the material we use, in safety and security and of course engine efficiency. Describing the future, our CEO has indicated that we are going to have much more fuel efficient engines and at the same time increase the output and efficiency of the cars. In a couple of years’ time we are going to introduce cars that will be more powerful than what we have today.
With superior technology, we are going to increase the fuel efficiency and also ensure that they are environment friendly. We will continue to keep our focus on the luxury car segment and will also attempt to reach our customers with more and more value. Our engines are going to be small, efficient and yet very powerful while also being environment friendly. So we will not take out the fun, but turn the engine more close to our core principle of life. In fact, the emphasis on environment friendly features differentiates Volvo cars from other car brands in the luxury category.
You have also doubled your marketing spend for this financial year. What works better in a segment like yours — mass media or consumer contact programmes?
Our marketing budget has been more than doubled this year. We want to focus a lot on reaching our customers on a one-to-one basis. Our focus is the 5 per cent high net worth individuals in India who can afford to purchase a luxury car. If we are only putting ads in newspapers, it will be like shooting blindly in the air, as we will not be able to reach out to our prospective customers in the best way or measure the reach. So we try to reach out to our customers on the golf platforms, in our association with the Lakme India Fashion Week. We try to identify what kind of publications and newspapers our customers like to read.
For example, many brands in India would like to associate themselves with the Lakme India Fashion Week. But Lakme loves to associate with companies like Volvo which has a certain image worldwide. At the Lakme India Fashion Week we see a lot of high net worth individuals who care about design, fashion and have experienced a drive in a Volvo car once or twice. When a high net worth individual actually drives a Volvo car and experiences the drive, there is always a higher chance that he will want to purchase it. It is an experiential engagement tool that we are banking on. At the show, we will not only display Volvo cars, but will also have courtesy cars for the guests, designers and models. All the marketing activities that we do are bifurcated into sharp targeting and engagement.
Take another example. We take out a business magazine, which can be read by the junior management as well as the senior management in a company. So we do a communication within that community by targeting only those thousand CXOs. There are specific communications that go with the magazine which the junior management might not get to see and only reaches the thousand high net worth individuals we are targeting. This is what we mean by sharp targeting. We will also augment engagements with our products at various HNI touch-points like luxury malls and airports to name a few.
After-sale services have always been a decisive factor for customers in this subcontinent, and in fact, across the world. How are you beefing up your distribution and after sales services?
Volvo car customers in India today are quite happy when it comes to their experience with their cars and services. We don’t have coverage across all major Indian cities at the moment, but wherever we have presence we offer services 24 hours, 365 days. For this, we look for dealers who can take care of customers 100 per cent.
To ensure better service, we also guide and educate our dealers on the best-in-class services and efficiency models. In order to increase attention, we engage our dealers in different activities like dealer-technician interface. We do different programmes together, emphasise on training and build motivated teams.
Although we are just about four years old in India, some people at our customer service section and some other positions have been working for Volvo for 15 years or more. They know Volvo inside out. Most of them were non-resident Indians who were working with Volvo at different locations of the world and were brought back when Volvo entered India. Even among the dealers, there are technicians who have been working for 10 odd years, who have been brought back from other locations of the world. These people are neither new to the machine nor to the brand. This makes a lot of difference in dealing with the customers, after sales services and motivating dealers.
You just said you have been around in the country about four years now. How would you assess Volvo Auto India’s overall performance during this time? Is there something you need to work on at the moment given the overall economic slowdown?
If we look at statistics, we see total annual volume of passenger car sales in India at around 2 million and its luxury volume includes around 5,000 cars, which is 1 per cent. So it is a very small segment in India. The worldwide average is 10 per cent. Our projection is to bring in significant increases in the luxury business of cars. A couple of years back, the share of luxury cars was 0.1 per cent of the total. You can see how it has increased and we estimate the share of luxury will be around 3 per cent by 2020. So, the potential is evident.
To answer your second question, it sounds like a cliché but I have to say that for the moment things appears good for us. Although there is a negative sentiment as well as the possibility of an increase in custom duties, but we are in firm ground. May be because we have a small base right now. All said, our growth curve is following our planned path.