Volvo starts local assembly of its cars in India

Mumbai: Volvo Auto India Pvt. Ltd has commenced local assembly operations of its models in India, the India arm of the Swedish luxury carmaker said on Tuesday.

It has started assembling the XC90, a premium SUV, and has plans to assemble more models, including the S90 sedan and XC 60 SUV, Charles Frump, the newly appointed managing director of India operations said in an interview.

Frump hopes the local assembly will help drive volume growth and will help the company double its market share to 10% in the luxury car segment by 2020.

Volvo currently sells nine models in India, including sports sedan Volvo S60, performance sedan Volvo S60 Polestar, premium sedan Volvo S60 Cross Country and luxury hatchback Volvo V40. Even though it has been selling cars in India for seven years, unlike German rivals Mercedes Benz AG, BMW AG and Audi AG, Volvo has been importing them instead of assembling them locally.

India levies a duty of 120% on imported cars, and 60% on completely knocked down kits. But Volvo is unlikely to cut prices of models even after the local assembly. “There will be no change in prices,” said Frump, adding that buyers will benefit in terms of faster delivery of models as they will no longer be required to be imported from Sweden. “Even as a CBU the models are reasonably priced. Moreover, the prices are determined by the market forces and not where it is assembled,” he said.

He declined to comment on the investment or the capacity of the new unit it shares with other Volvo group companies which sell trucks, buses, and construction equipment.

Volvo sold 2,000 cars in the first nine months of the current calendar year, up 25% over a year ago. In a bid to make deeper inroads in a market that accounts for less than 2% in the broader passenger vehicle market, Volvo plans to add 10 more dealerships taking it up to 30 in the next couple of years, said Frump.

IHS Markit, a sales forecasting and market research firm, estimates the luxury segment to expand by more than 10% in 2017, the fastest in three years, and 42% and 21% in 2018 and 2019, respectively.

In July this year, Volvo announced that globally, all new cars launched by Volvo from 2019 onwards will be partially or completely battery-powered. Frump said the company’s India strategy is in line with the Indian government’s electric mobility mission plan, which envisages to make India an all-electric vehicle market by 2032.