Volvo turns bullish on EVs in India after duty sops

As soon as the news about the government slashing custom duty on electric vehicles (EV) from 30% to 10-15% was out, Charles Frump, managing director of Volvo Cars India, called up the company headquarters in Sweden. 

Frump, who joined the India operations in October 2017, asked the management to start putting business proposals together for EV business in India. 

Frump had a reason to be excited as the company has already planned to assemble the Volvo XC90 Excellence, India’s first plug-in hybrid SUV from its Bengaluru plant this year. 

Just two days prior to the Interim Budget announcement, the government had announced the duty cuts on completely knocked down and semi knocked down vehicles, which is likely to make importing greener vehicles attractive over the petrol/diesel variants. 

The development is expected to encourage companies to assemble in India, thereby generating job opportunities and increased revenues for the government.

“That is very significant for us,” Frump told DNA Money on Wednesday on the sidelines of the launch of Volvo’s second retail showroom in Mumbai.

India is the fastest growing market for Volvo Cars, which grew at about 30% in 2018, capturing about 7% market of the luxury car segment in India. In 2017, the company witnessed its volumes growing by 28%.

Commenting on the regulatory policies in India, Frump said, “Though the regulations help in going from complete built up (CBU) to completely knocked down (CKD), as already there are custom duties on it. But there is very little support when one moves from internal combustion engine (ICE) to plug-in hybrids.” 

“We are trying to create general awareness about the significance of plug-in hybrids,” added Frump.

According to the senior company executives, the right product mix and dramatic expansion of its retail network from 15 to as much as 25 around two-and-a-half years back helped it quickly scale up volumes, despite the overall slowdown in the industry last year. 

The company now wants to enhance its after-sales service capability.

The luxury car market recorded a slow growth of less than 5% during 2018 despite the companies lining attractive discounts and offers to drive demand, according to the latest sales data released by equipment manufacturers. 

The segment collectively witnessed sales of 40,863 units in 2018 in comparison to 38,950 units last year. 

Several company executives said that the sales were as per expectations till mid 2018, only to tumble after that, on account of reasons, including increased government taxes, tighter liquidity and lending rates, increased insurance costs and lower consumer sentiments. 

Frump said the industry will continue to face headwinds even in 2019 due to a liquidity crisis and the upcoming general elections keeping the uncertainty intact.

BIG POTENTIAL

• The luxury car market recorded a slow growth of less than 5% during 2018 
   
• Luxury car sales in mid-2018 hit on account of increased government taxes, tighter liquidity and  lending rates and lower consumer sentiments 

SPEEDING AHEAD

• 30% – Volvo cars grew in India in 2018
   
• 7% – Its market share in the luxury car segment of the country
   
• 40,863 – Total luxury vehicles sold in the country last year