With 50 per cent of the Volvo Buses’ business expected to come from Asia by the year 2015, the company is looking at India with renewed vigour. In conversation with Rajarshi Bhattacharjee, Akash Passey, senior vice-president, Business Region International, Volvo Bus Corporation, and chairman of the Board, Volvo Buses India, lays out the company’s growth trajectory in the country.
You have recently launched a slew of products. What is your expansion plan for Asia in general and India in particular?
The bus segment is really doing great in India both in tier 1 and tier 2 cities. We have a major share of the market developed by Volvo over the last 10 years and of course we have plans to further expand the market. We see that with the developing economy, there are many new segments coming in, which means if we want to remain a major bus player in the future then we need to move on to newer segments. Keeping this in mind we have decided that we will have a much broader product range, we will offer higher capacities produced out of India and have a larger distribution footprint. Towards this end we have announced an investment of Rs 400 crore over the next few years, the first step of which is already in progress wherein we are raising the capacity of our buses from 1,000 to around 2,500 a year by the year 2013. So most of the investments will take place in 2012.
Your expansion plan also reveals your strategic interest in the bus segment of the premium tier 2 cities of India? How do you assess the potential of these markets?
There are two ways of operating in India. One is just to remain a premium player and the other is, even though you are a premium value-adding player, you expand your business. We have chosen the second option. Today intercity buses and long distance buses are the focus of all big companies in this segment. However, we know that there is a large market in tier 2 and tier 3 cities which have a population of five million to nine million or more. The fact that these cities are within 300 to 400 kilometers away from each other and that people want to travel in a good way even though they cannot pay a very heavy ticket price all the time makes it attractive for us. Keeping in mind the fact that they are willing to pay a little higher, we have started creating niche products — the 9100 coach was the first to be introduced in December last year.
What are the latest innovations in safety, fuel efficiency and comfort that Volvo Buses can lay a claim on?
There are a lot of innovations in these segments. We have introduced the Front Impact Protection and Front Under-Run Protection systems in all Volvo buses that are important safety features. We are also offering the alcolock feature (an in-car breath alcohol screening instrument that prevents a vehicle from starting if it detects a driver’s blood alcohol concentration over a pre-set limit) in our buses. It is going to be a customer option feature that can help in curbing drunken driving.
In India, the accolade of being environmentally responsible does not yet carry much weight in the purchase decision, especially among fleet operators, say observers. As a leader what have you done especially in this respect?
Volvo is in India for the long run. We believe in being environmentally responsible and advocate the idea all over the world including India. In fact, this is one of our core values — to care for the environment. You can say we are setting an example for others. When we first came to India, we were the only ones to have air conditioned rear engine coaches. Today all our competitors have it. I think it’s a big change. Six years back, when we entered the low-floor bus segment, nobody had it. Today everybody has it. We also introduced the multi-axle buses in India. We have the responsibility to drive the change and positively influence the quality of life of people and how they travel in India.
What is the focus of your investments right now? Which teams are you scaling up – sales or product development?
We have made our manufacturing footprint in Bangalore, India, by setting up a factory there. We started with design and manufacturing of the Volvo 9100 coach for India and other Asian markets. We are also beefing up product development and purchasing functions. We have our own skill development centre where we train our employees. We will continue with hiring a couple of hundred people every year.
There is a huge unorganised market of private bus operators in India. How has that shaped the way people travel and their expectations from a fleet operator?
If we look at the history, bus transport operations were mainly family businesses. There was no concept of the bus going back to the service centre or being owned by a company. Against that background I would say that things have changed. We have a large number of support chains across the country. Almost 80 per cent of our buses come to us for servicing. The traditional concepts are no longer perceptible. So operators are busy selling tickets, transporting people and we are servicing the buses. There is a huge consolidation of the big private operators in India.
What are the global standards for a city’s mass transit system?
If you talk of the most efficient transport system, it should be the one that allows access to all transport systems with one smart card. With the same card you can travel in a bus, a cab, or a metro or a ferry. An efficient transit system should also address last mile connectivity. The traffic system should encourage people to opt for public transport – allow buses to pass before cars from a traffic signal in a BRT, offer real-time information — inform commuters on their mobile phone even if the bus is running late by one minute.
India, in this regard, has a lot of possibilities. One reason is there is no dearth in volume of people in Indian cities. In many cities around the world, such initiatives could not be undertaken because they do not have the volume of people to sustain them. As volume is available in India, ticket prices can be low. The key from the Indian perspective will be how we manage this volume of people between 9.00 am and 11.00 am, the morning peak hours, and between 5.00 pm and 7.00 pm, the evening peak hours, in the most efficient way. A comprehensive bus transit costs almost one-tenth to one-hundredth of a metro system as well as offering last mile connectivity that is almost impossible in a metro rail service.
The company has played a key role in making public transport become an attractive option for commuters in rapidly expanding urban locations. How has the emergence of BRTs in India shaped the way Volvo builds its products?
Bus Rapid Transport is a concept that is prevalent across the globe for the last 35-40 years. Forty cities of the world where BRT is serving well were primarily built on buses built by us. Volvo today has the strongest position in the world for city public transport initiatives like BRT etc. We are very happy that this thinking is coming to India, even though it is at a very nascent stage. The thinking now is we have a product, a dedicated bus corridor and that is BRT. But that’s not what BRT is. BRT is a system-it’s a combination of having the right fleet, right management of the fleet, having a traffic management system that can inform people about the bus schedule and real-time status. One need not go to the bus stop to find out when the bus is coming; one can access the updated information about the bus on his mobile phone. The Volvo fleet management system supports all this. When the transit system matures to that level, we will also see that Volvo playing a big role in making the Bus Rapid Transport operations successful.
What have been your top challenges over the past two years? What are you worried about, going forth?
We are worried about the state of the economy. We are worried about the rate of inflation, the higher rates of interest because that hits our business. As against coach buying in India, city bus buying has gone down over the last two-three years which is not a good sign. But we know that the government is working on these issues and doing its best to retain confidence in the market.
If you were asked to formulate a global action plan for a rapid introduction of electric/hybrid vehicles, what would be your top three points on the agenda?
I do not think we need to formulate anything as in Volvo we already have it formulated. The top three things which can be on the list is: one, higher reduction in fuel consumption. We are already getting an average of 37 per cent reduction in fuel consumption. Two, comfort inside the bus because of the silence. Take the new Volvo Hybrid. When it comes to the bus station, the engine stops. When it starts from the bus stop and reaches the normal traffic speed, from 0 to 40 kmph there is no running engine. During this time the bus is running on battery. Sitting inside the stationary hybrid bus, passengers don't feel when it started moving because there is no engine noise. Third, 50 to 60 per cent reduction in emissions. I will also like to mention here that the industry, with a united approach, needs to work with the government to develop technology and explore possibilities.
While CNG and conventional fuel efficient buses are popular, their hybrid counterparts remain an expensive option. What's the future?
Volvo is a company that has presence in all the markets, which means that we have all kinds of products. It is up to the market to choose. There are certain markets that only go for diesel engines. There are certain markets, now including some cities of India, that go for CNG. Some markets in Europe and the US are now shifting to the next phase of only hybrid buses. Then we have markets like China where the shift is towards battery or electric buses. We have products available in all these formats.
What we need is a big change in fleet management. The fleet operating in the country is very old, in terms of age and quality. I would really love to see every bus hybrid or electric in India. But the situation will not be the same all over. The bigger cities will aspire to be the best in the world. I will not be surprised if cities like Delhi, Mumbai, Bangalore etc go for hybrid or electric solutions as soon as possible.
