It is now over three years since the Volvo group and Eicher Motors came together to create VE Commercial Vehicles and its Chief Executive Officer, Mr Vinod Aggarwal, says the best is yet to come.
“It has been a wonderful joint venture and the trust between the partners has been the high point of this journey. We now want to do a lot more in terms of products and synergies,” he told Business Line in a recent interview.
Volvo's strength lies in business processes and its profound knowledge of reliability issues and after-sales. Eicher is learning these aspects and implementing them in its daily working schedules at the Pithampur plant.
Quality, efficiency
In addition, there is a full-time person from UD Trucks of Japan working on quality management who is driving change within the organisation. Incidentally, UD Trucks (formerly Nissan Diesel) is owned by the Volvo group.
“Our results speak for themselves in terms of margins which have almost doubled to nine per cent. In my view, processes are more important because you learn to carry out your business a lot better. We would like to have better efficiencies in productivity, marketing practices and so on,” Mr Aggarwal said.
Engine project
VE Commercial Vehicles is now implementing an engine project to cater to Volvo's needs in Europe. These are Euro 6 engines which will be made here and tested in Europe. They can also be adapted for India's Euro 3 and 4 emission norms.
The company plans to produce 5,500 trucks each month at its Pithampur plant through 2012. The optimum capacity here is 7,500 units which could be less than three years away if the present growth momentum continues. The focus will be on heavy duty trucks (over 15 tonnes capacity), where VE Commercial Vehicles has a market share of barely 3.5 per cent.
Tough market
Clearly, it is not an easy market to operate with strong players like Tata Motors and Ashok Leyland as well as competition coming in from the likes of Daimler and Scania.
“Results will take time because it is a business proposition, and not a status symbol, for the customer. He looks for reliability, fuel efficiency, comfort, turnaround and maintenance costs,” Mr Aggarwal said.
Once Volvo's four global brands (Volvo, Renault, Mack and UD Trucks) eventually enter the Indian market, they will operate in tandem with Eicher's own range. Thus far, the Swedish company's presence is largely confined to tippers assembled at its Hoskote plant near Bangalore. According to the business model, sales and distribution of all Volvo truck brands (and not buses) in India will operate through the joint venture which means manufacturing can be done anywhere.
“In turn, we will be able to use Volvo's global network for emerging markets, especially if we want to launch trucks and buses. Any cost reduction opportunity for them could come from local sourcing,” Mr Aggarwal said.
Eicher is also planning to grow its brand presence in buses where it has a relatively strong presence in the light and medium segments. Plans are under way to ramp up its business of intercity coaches and low-floor city buses.