Volvo eyes partner for assembly plant

MUMBAI: Volvo Auto India, the Indian subsidiary of Swedish luxury car maker, is scouting for an Indian partner to set up an assembly plant in the country since it is the only mainstream luxury car maker not to have a local manufacturing, or assembly base, here.
Importing vehicles as fully-built units, Volvo Auto India is losing heavily, paying hefty import duties, running up to a staggering 100-180% for all cars imported.

Hakan Samuelsson, president of Volvo Cars, told ET exclusively that since the Indian market is growing rapidly, Volvo is looking to set up CKD operations in the country, but is yet to take a final call on the matter.

“We need a local partner who under stands the local conditions and can help us build such an assembly plant. We are studying the profitability and magnitude of investment needed and how we can bring in a reliable partner,“ Samuelsson told ET.

Volvo, which is owned by Chinese carmaker Zhejiang Geely Holding Group, competes against the top three German luxury car makers -Mercedes-Benz, BMW and Audi in India -but in terms of volumes, it is as big as Toyota's Lexus or Jaguar Land Rover globally with sales close to half a million units.

The Indian luxury car market, howe ver, is about 37,000 units, of which Volvo has a 5% market share. The Swedish car maker prices its cars aggressively in a fiercely-competitive market despite importing the products as completely-built units. And it is this aggressive pricing that is pulling down the Indian subsidiary's profits, which it wants to protect in the future.

Samuelsson said Volvo products are ideal for India, but the company is selling in limited numbers due to high entry barriers with very high border taxes. With global trade likely to change under a protective US President Donald Trump, Samuelsson said, “So far, India is ahead in this development (of high trade barriers for cars), a bit too high maybe. So, to really grow in the Indian market, we have to come inside, but there has to be a business case to take that decision. We are yet to come to a conclusion on the matter.“

But if Volvo sets up its own manufacturing or assembly plant here, its duties will come down drastically.