Gupta2007 MCSJ VolvoinIndia-AnalyzingaMNCsStrategiesinaDevelopingMarket

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Volvo in India: Analyzing a MNC's Strategies in a Developing Market
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Volvo in India:
Analyzing a MNC’s Strategies in a Developing Market
Nitin Gupta
Faculty, Marketing,
ICFAI Business School, Hyderabad
Abstract:
The case discusses the performance of Swedish commercial vehicle major AB

Volvo’s Indian operations. It examines the major competitors for Volvo in India –
Tata Motors, Ashok Leyland, Eicher Motors and Swaraj Mazda; analyzing their
performance, innovations and strategies. The current environment that is
prevalent in the Indian Automobile Industry’s commercial vehicles segment is
also presented. Through analyzing the strategies and performance of Volvo and
other major players in the commercial vehicles market in India, the case tries to
bring out the dynamics of a developing market and the strategies that an MNC
has to adopt to be successful in this market.
Introduction:
“India is increasingly becoming a key market for the Volvo Group – not only as a market but as a sourcing
hub. With this new focus, Volvo’s foundation in India gets deeper with a presence across trucks, buses,
construction equipment, engines, global component sourcing, IT sourcing and product development”.
Mr. Eric Leblanc, Managing Director, Volvo India1.
Translated literally, Volvo means "I roll", and it has rolled to become one of the world's
strongest brand names. Today Volvo Group is one of the world’s leading manufacturers of
trucks, buses and construction equipment, drive systems for marine and industrial
applications, aerospace components and services. It has production facilities in 25 countries
and sales in more than 185 markets. Volvo employs approx 82,000 employees and the Volvo
Group's net sales in 2005 amounted to approx EUR billion 232.
In Mid 2006, Volvo India, the Indian Subsidiary of the Swedish commercial vehicle major
AB Volvo was well on its path to increasing growth and penetration in India. Volvo was
making vigorous efforts in new markets in Asia, with India being one of its key focus
markets. Volvo's entry into India in 1998 coincided with the changing demands of the Indian
economy - demands both in terms of quality and quantity. Volvo from the very beginning
believed that the high awareness of technology in India would make it an ideal base for
production and global sourcing. Volvo, in 2005, was the third largest heavy truck
1
Ref: http://www.volvo.com/trucks/india-market/en-
in/newsmedia/pressreleases/pnt_press_search.htm accessed on 11th Sept. 2006.
2
Ref: http://www.volvo.com/group/global/en-gb/Volvo+Group/ accessed on 7th Sept.
2006.
18 The Management Case Study Journal Vol. 7 Issue 2 Dec 2007 pp 18-38 © University of South Australia ISSN: 1445-033X
manufacturer in the world after Daimler Chrysler and Isuzu3. Its trucks were reputed for
their performance, safety and economy world over and were the flag bearers in their
production activities in India.
Since 1998, Volvo India had been driving along steadily and smoothly into the high-end
commercial vehicles segment carving a special niche for itself. Apart from high-end trucks
and buses, it also produced construction equipment like excavators, haulers and wheel
loaders. It was aiming for a double-digit growth in the coming years. The Indian Subsidiary
had achieved its break-even in 2004. Now, the focus was on continuous investments and
operational upgradation in India.
Background Note:
Since the late 1890s, when the first commercial vehicles were developed in France, Germany
and the United States, the importance of truck transportation has grown continually. Volvo
began its operations in late 1926, preparing for the production of cars, which started in April
1927. The first Volvo truck rolled off the production lines in February 1928 from its factory
in Gothenburg4, Sweden. Right from the start, a Volvo truck was considered to be fairly
expensive. Customers chose a Volvo generally for its superior quality and ruggedness in spite
of its higher price. From the very beginning, the founders of Volvo, Assar Gabrielsson5
(Gabrielsson) and Gustaf Larson6 (Larson), focused on safety.
The 1930s was a decade of growing success and improved products for Volvo. Although its
first generation of trucks looked old-fashioned, Volvo soon caught up with more well
established manufacturers. Volvo started to produce trucks that ran on diesel fuel, trucks
with steel wheels instead of wooden spoke wheels and trucks with efficient hydraulic brakes.
Heavy-duty Volvo trucks soon became commonplace on the roads of Sweden and selected
export markets. The expansion of Volvo truck operations was extremely fast in the mid
1930s. By then the annual production of trucks was nearly 5,000 units. There were plans for
a heavy city bus and a powerful new truck; both of these were introduced in 1937.
Not until the 1950s did Volvo become a major supplier of heavy-duty trucks. From 1928 to
WW II (1945), Volvo was, however, a major producer of medium-duty trucks, which
sometimes were used for heavy-duty purposes due to the rugged design.
Volvo introduced their trucks in the USA in the late 1950s. The experiences it had from this
very demanding market had great impact on future Volvo trucks. Despite the fact that Volvo
was, in the early 1960s, a very successful international truck manufacturer, the number of
medium-duty trucks produced annually by Volvo was far too small to enable the
development of a first-class medium-duty truck alone. Since Volvo had the ambition to grow
3
Ref: OICA 2005 Statistics from site: http://www.oica.net/htdocs/Main.htm accessed on
11th Sept. 2006.
4
The city of Gothenburg is located on the West Coast of Sweden. Being the second largest
city in the country, Gothenburg is a vital part of Swedish industry, education and culture,
business and shipping. Important industries for the city include Volvo, SKF bearing factory
and the SAAB car manufacturers.
5
Assar Gabrielsson was the founder of Volvo. He was the Managing Director of AB Volvo
from 1926–1956 and was the Head of the Volvo Group and Chairman of AB Volvo from
1956–1962.
6
Eric Gustaf Larson was the Technical Director and Vice Managing Director of AB
Volvo from 1926–1952.
in this segment as well, the solution was to seek development partners among other relatively
small European manufacturers in this segment.
The result was the ’Club of Four’ which was formed in the early 1970s and which had a
design office in Paris, France. This ’club’ was formed by Volvo, DAF, Klöckner-Humboldt-
Deutz (’Magirus’) and Saviem (a French make which later merged with Berliet to form
’Renault Vehicules Industriels’). All these four manufacturers shared the ambition to develop
a modern ergonomic high-quality medium-duty distribution truck. The ’Club of Four’ was a
fairly successful joint project.
The 1970s was a decade of refinement in the truck industry. More European manufacturers
were beginning to fit their trucks with tilt-cabs (a move pioneered by Volvo in 1962) and
turbocharged engines (Volvo had been the first, back in 1954). The horsepower rating of
engines also grew, resulting in increased average speeds.
During 1970s, Volvo erected a completely new modern truck factory in Oostakker7 for the
production of its trucks. This factory later started producing heavy-duty Volvo trucks. In
2006 it was the main European Volvo truck factory, and the second largest Volvo truck
assembly plant in the world.
Since 1927 to mid 1970s, Volvo was often a fairly conservative company when it came to
products. This was very much due to the lack of resources for design and testing during that
time. When Volvo grew and obtained larger resources, it started to be in the forefront of
European design. The most dramatic products ever introduced by Volvo were the F10 and
F12 trucks of 1977. These revolutionary trucks created a completely new standard for
ergonomics and safety. All trucks (of all makes) introduced during the last two decades, have
to a large extent been influenced by these trucks.
In the 1980s, trucks became even more sophisticated. Most cabs were modeled on the Volvo
F10/F12/Globetrotter models. Engines became better, stronger and, above all, more
environmentally-friendly. By 1980s, Volvo had become a major global manufacturer,
especially with the purchase of the truck assets of the American truck manufacturer White
Motor Corporation8.
If the 1980s had been the decade of sophistication for the truck, the 1990s and 2000s (So
far) have been devoted to environmental considerations, producing more efficient vehicle
combinations and seeing the integration of IT-solutions such as Volvo Dynafleet 2.09, which
provides haulage companies and drivers with tools that increase the efficiency and safety of
each journey. With top priority being given to cleaner emissions and low noise levels, engines
were refined and, in a few cases, totally new engines, such as the revolutionary Volvo D1210,
were introduced.
7
Oostakker is a small town near Ghent, Belgium.
8
In 1981 Volvo acquired most of the assets of the US truck company White Motor
Corporation and formed Volvo White Truck Corporation.
9
Dynafleet 2.0 is the market's only fully comprehensive transport information system. Clear
communication and exact information make it easier for all involved in the transport chain
to make the right decisions.
10
The D-12 series is based on a 12.1-liter, turbocharged and aftercooled in-line six featuring
one electronic unit injector for each cylinder. Its induction-hardened crankshaft has seven
Volvo in India:
Volvo inaugurated its manufacturing facility for heavy commercial vehicles in Hoskote, near
Bangalore, on June 15, 1998 and rolled out its first truck in India, the Volvo FH12 (See
exhibit 1), in June 1998.
The Volvo’s Hoskote factory had an initial investment of around Rs 3 billion (US$ 65
Million) and produced Trucks and bus chassis. This factory was located in an area of 122
acres. By 2006, it had an assembly unit (including gearbox assembly11) along with cab
welding, superstructure mounting and welding operations, paint shop, shot blasting, a test
track, a driver training center and a technical training center. The factory met ISO 9000
quality standards and ISO 14,000 certification for Environment standards. There were close
to 140 people working on the shop floor, with an average age of around 24 years. The
installed Capacity was 1200 Vehicles per annum, which can be quickly stepped up to
additional volumes.
Volvo’s Indian production unit also undertook servicing of trucks and superstructures. The
plant incorporated advanced systems, including closed loop systems in the paint shop;
biological treatment in waste water treatment; and reverse osmosis12 in sewage treatment.
Factory noise levels at boundaries were 40db as against the regulation levels of 60db in India.
The company had over 50 sales and support points, including support at remote customer
sites. In each of these, the work was carried out with consideration for the environment.
Some workshops were in the process of introducing environmental management systems
conforming to ISO 14001.
On October 20, 2001, Volvo introduced its Inter-city luxury bus, the Volvo B7R (See exhibit
2), taking Volvo in India on the path of being a total transport solutions provider (See
exhibit 3 for Volvo’s operations in India). This was a very thoughtful strategic initiative by
the company and was very well received in the Indian market. Volvo first introduced its bus
in South India, followed by Western parts of India. Entry into North India took place early
2004 and in January 2005, it stepped into the Eastern Region of India. In April 2006, 1000th
Volvo B7R bus was rolled out from Volvo’s Hoskote Plant. Volvo Buses, by mid of 2006,
accounted for close to 60 per cent market share in the luxury AC, inter-city bus segment in
India.
By Mid 2006, in India, Volvo had sold around 1,000 buses and around 3,000 trucks. In 2004-
05 itself, Volvo earned US$ 134 Million from its operations in India with sales of 600 trucks
and 400 buses, an increase of about 65 per cent from the previous year13. The company
exported truck components worth US$ 40 Million in 2005 and expected to export
components worth US$ 56 Million in 2006. Volvo planed to increase the sourcing of
components from India by 40 per cent in 2006-07.
main bearings for durability and two vibration dampers designed to reduce the roughness
inherent in a diesel engine.
11
Volvo’s factory in India is one of the only two units outside Sweden to assemble gear
boxes.
12
Reverse osmosis, also known as hyper filtration, allows the removal of particles as small as
ions from a solution. It is used to purify water and remove salts and other impurities in order
to improve the color, taste or properties of the fluid.
13
Ref: http://www.thehindubusinessline.com/2006/01/11/stories/2006011101300700.htm
and http://www.thehindubusinessline.com/2006/06/27/stories/2006062703500900.htm
accessed on Sept. 8th. 2006.
Volvo’s products in India were priced at a premium as compared to the local competition.
Volvo trucks were priced in the Rs. 2.8-6.5 Million range (US$ 60,215 – US$ 139,785)14 and
the buses were priced in Rs. 6-7 Million range (US$ 129,032 – US$ 150,538). The company
had achieved 30 per cent localization content with regard to trucks and 20 per cent in respect
of buses. This percentage was estimated to go up according to the increasing volumes of the
company’s products in India.
Strategies of Volvo India:
Volvo in India had its focus in providing economical transport solutions in consonance with
its values of safety, quality, and environmental care. Just as trucks and buses were being
introduced, Volvo in India also introduced the entire range of Volvo Construction
Equipment – Wheel Loaders, Excavators, Motor Graders and Articulated Haulers. The main
strategic impetus behind such range of new introductions was that Volvo aimed to emerge as
a pioneer, and subsequently market leader, in providing high-performance transport
solutions and construction equipment in the developing Indian market.
With its abundant supply of economical and highly skilled work force, India was an ideal
destination from which Volvo could expand its market share not only in the South Asian
region, but also in other regions of the world. This was the reason why Volvo replaced
Singapore with India as its SAARC region headquarters. Volvo indeed had strategized to
develop its operations in India into a cornerstone for its global production and distribution
systems in this globalized automobile market. As a part of this plan, in 2003, Volvo started
to export buses assembled in India to the South Asian Association for Regional Co-
operation (SAARC) region, starting with Bangladesh. In 2005-06, 130-150 Volvo trucks and
buses were exported to Bangladesh, Sri Lanka and South Korea.
Volvo also focused on making India a key source for global sourcing of components along
with IT & Engineering Services. In February 2006, Volvo India inaugurated its new
technology center at Bagmane Park in Bangalore to support Volvo Group activities in the
areas of IT and Truck product development. Volvo intended to build India as a base for
Truck Product Development aimed at supporting strategic expansion in Asia.
In June 2006, Volvo India launched new generation of its FM 12 and FM9 trucks (See
exhibit 4). Initial models of these trucks were introduced in 2004. These trucks had an
entirely new 13-litre engine that, according to Volvo, improved upon various aspects
affecting transport economy, like – reliability, durability, fuel efficiency and performance
levels. These engines also met the Euro III norms. Indeed, all Volvo trucks incorporated the
latest Euro III emission norms even though Euro II engines were good enough for India’s
pollution norms (See exhibit 5 for details on Euro pollution norms). By providing such
technologically advanced products, Volvo wanted to further enhance its competitive edge in
the huge Indian heavy commercial vehicle (HCV) market. Volvo Trucks in India had built a
strong dominance in sectors like mining, heavy goods transportation and applications
demanding high safety and heavy haulage.
Since its entry into the Indian market in 1998, Volvo followed the niche marketing strategy
and was present in the high-end, high-performance trucks and buses segment only. But, in
2006, Volvo started discussions with the Hinduja group to acquire a stake in Land Rover
14
Conversion rate $ 1 = Indian Rs. 46.5/-, according to rate prevailing in Sept. 2006.
Leyland International Holding, (LRLIH) a UK-based company15. This acquisition would
enable Volvo to enter the medium commercial vehicle segment in India. Since, in the
developing Indian economy, the commercial vehicle segment was growing by leaps and
bounds, this was a much required strategic modification on Volvo’s part.
In January 2006, Volvo introduced intra-city buses in India, in the city of Bangalore. The
market for these buses was estimated at about 10,000 units a year and was expected to
further rise as domestic travel picked up. The company had planed to introduce CNG16
models in this market in the future.
Volvo aimed to enhance its dealer network through private dealers. In 2006-07, Volvo India
had about 75 Volvo support points to provide service to its customer’s trucks & buses.
As Volvo India’s products were priced at a premium as compared to local competition,

Volvo wanted to educate the Indian customer that though the initial costs of buying a Volvo
vehicle was higher when compared to other vehicles in the same range, but in the long run,
the operator accrued better advantage in terms of cost per kilometer or the cost per
passenger.
Volvo had also devised a new marketing strategy for India, which included splitting the
entire truck market into separate segments and focusing on each of them to gain a market
share. E.g. for sectors such as mining and tractor-trailer applications segment, Volvo had a
separate marketing strategy.
Volvo had grown across all business areas in 2005-06 and hoped to continue the momentum
in the future.
Volvo’s Major Competitors in India:
In India Volvo faced tough competition from the leading players like Tata Motors and
Ashok Leyland. Besides these two major competitors, the other prominent players were
Eicher Motors and Swaraj Mazda. All these players were fighting for an increasing market
share in the growing medium and heavy commercial vehicle segment. A brief description of
each player is given as follows:
Tata Motors:
Established in 1945, Tata Motors entered into collaboration with Daimler Benz of Germany
in 1954 to manufacture commercial vehicles. This collaboration ended in 1969. Tata Motors
had since grown from strength to strength. The Company had spread its manufacturing
facilities across India by setting up plants at Jamshedpur, Pune and Lucknow. This was
coupled with a nation-wide sales, service and spare parts network. The Company enjoyed a
significant demand in export markets like Europe, Australia, South East Asia, Middle East
and Africa. The Company’s vehicles were seen in all the continents.
In March 2004, Tata Motors acquired Daewoo Commercial Vehicle Co. (DWCV) at a cost
of $102 million, making the $250 million company as a 100 per cent subsidiary of Tata
Motors. In 2004, DWCV was Korea’s second largest heavy truck maker with a modern plant
15
LRLIH is the holding company of Ashok Leyland - India's second largest commercial
vehicle maker.
16
Compressed Natural Gas
in Kunsan17. It had an annual production capacity of 20,000 medium and heavy vehicles and
had 800 employees. DWCV enjoyed a market share in excess of 26 per cent in the Korean
heavy truck segment and had operated profitably since its incorporation. In Sept 2004 Tata
Motors also listed itself on the New York Stock Exchange (NYSE).
Tata’s strategy in 2004-05 had been to prune its target export markets from 70-80 countries
to a dozen countries and to focus on specific segments in these markets. Tata Motors
developed an accurate econometric forecast technique for better supply and logistics. As a
result, the company managed to reduce outbound material by 23 per cent and increase the
export outbound efficiency by 25-30 per cent18.
To counter Volvo’s initiative in India, Tata launched the 'Novus' range of heavy commercial
vehicles (HCV) sourced from Tata-Daewoo of Korea in 2006 (See exhibit 6). This launch
was a result of meticulously drawn counter-offensive plan again Volvo India. In mid 2004
Ravi Kant (Kant), Tata Motors Executive Director for Commercial Business Units had said,
“In the next 12 months, we will ship Daewoo trucks into India from our Korean plant. Our
intention is to provide heavy duty logistics solutions to the Indian transport sector and
compete with global players like Volvo.”
With revenues of $5.5 billion in 2005-06, Tata Motors commanded the title of India's largest
automobile company. In 2005-06, it was also the world's fifth largest medium and heavy
truck manufacturer and the second largest heavy bus manufacturer. In 2006, it sold 165,362
units of Medium and heavy commercial vehicles (M&HCVs) (an increase of 35 per cent over
2005) and 117,808 units of light commercial vehicle (LCV) (an increase of 55 per cent over
2005). As a result of such impressive sales figures, its market share for LCVs increased to 66
per cent compared to 56 per cent in 2005, while M&HCVs garnered 63 per cent market
share compared to 62 per cent in 2005. To counter such powerful and well-entrenched
competitor will be a formidable task for Volvo.
Ashok Leyland:
Mr. Raghunandan Saran, an industrialist had set up Ashok Motors in 1948. In 1955, Ashok
Motors became Ashok Leyland with equity participation by British Leyland. Since 1955,
Ashok Leyland has had a major presence in India’s commercial vehicle industry. These
decades have been punctuated by a number of technological innovations by Ashok Leyland
that went on to become industry norms. Ashok Leyland was the first to introduce full-air
brakes, multi-axled trucks and a host of innovations in buses.
In 1987, the Hinduja Group and IVECO19 bought the overseas shareholding in Ashok
Leyland. This tie-up has given Ashok Leyland access to contemporary automotive
technology.
In 1994, Ashok Leyland introduced the Cargo range of world-class trucks (See exhibit 7) that
set new standards of operator comfort, safety and reliability. Committed to Total Quality
Management, Ashok Leyland was the country’s first automotive manufacturer to obtain the
17
Kunsan city is in North Cholla province, SW South Korea, on the Yellow Sea at the Kum
River estuary. It is a major port, especially for rice shipments, and is a commercial center for
the rice grown in the Kum basin.
18
“Tatas set to roll in Daewoo trucks”, Business Standard, July 13 2004.
19
IVECO, a company in the Fiat Group, is one of the leading international manufacturers of
commercial vehicles and diesel engines.
coveted ISO 9002 certificate followed by the more comprehensive ISO 9001: 1994
certification and in late 1998, the latest version of QS 9000 certification.
With six manufacturing locations at Chennai, Hosur (two plants), Hyderabad, Alwar and
Bhandara, Ashok Leyland manufactured around 50,000 trucks and buses annually, besides
diesel engine for industrial, genset and marine applications. Ashok Leyland’s product range
constituted largest range of commercial vehicles with trucks from 7.5 Tons GVW20 to 40
Tons GVW, buses from 19 to 79 seaters and a host of special application vehicles including
fire-fighters doing duty at international airports.
Cargo trucks and the state-of-the-art Rs. 6 billion factory at Hosur were built with IVECO’S
global strategy in mind. The Hosur plant served as a world-class manufacturing base for
IVECO supporting its extra-European markets. To Ashok Leyland, it meant retaining its
technological edge against potential global competition from Volvo India.
The Cargo range of trucks met contemporary emission norms and gained acceptance
internationally. Besides fully built vehicles being exported to many markets, Cargo was
locally assembled in South Africa, East Africa and Egypt from SKD/CKD21 packs exported
from Hosur. A recognized trading house, Ashok Leyland exported to over 40 countries.
In 2006 Ashok Leyland was the second largest commercial vehicle producer in India. In
order to further strengthen its R&D efforts towards technological excellence and global
competitiveness, Ashok Leyland acquired AVIA truck business in Prague in June 2006. In
the same year, the company also bought out IVECO's stake in LRLIH22 Limited, UK, to
become 100 per cent owner of the British company.
In direct competition to Volvo inter-city buses, Ashok Leyland introduced 45-seater 12m
inter-city luxury buses in 2006. These 12m bus are targeted at the intercity transport segment
and provided the highest seating capacity among luxury buses in India. This Indian giant too,
like Tata Motors, will prove to be a formidable competitor for Volvo in future.
Eicher Motors:
Eicher Motors23 was founded in 1982 to manufacture a range of reliable, fuel-efficient

commercial vehicles of contemporary technology. The unit manufactured and marketed
commercial vehicles with Gross Vehicle Weight (GVW) ranging from 5-25 ton.
In 1986, Eicher Motors entered into a technical and financial collaboration with Mitsubishi
Motor Corporation of Japan to manufacture the Canter range of vehicles. The technical
assistance agreement with Mitsubishi ended in March ‘94 after successful transfer of
technology and on achieving total indigenization with only a few parts sourced globally.
By 2003-04, Eicher Motors had become one of the prominent manufactures of commercial
vehicles in India, with a 33% market share in the 7Ton-11Ton segment. Its manufacturing
20
GVW stands for Gross Vehicle Weight.
21
SKD = Semi Knocked Down, CKD = Completely Knocked Down
22
Land Rover Leyland International Holdings
23 Eicher Motors is a part of Eicher group that began its business operations in 1959 with
the roll out of India’s first tractor. By 2003-04, the Eicher Group had become a significant
player in the Indian automobile industry with a gross sales turnover of over Rs. 16,000
million
facility was situated in Central India – Pithampur, Madhya Pradesh24. In 2003 Eicher
Motors stepped into the Heavy Commercial Vehicle segment with its state-of-the-art HCV
(Heavy Commercial Vehicle), the "Eicher 20.16" (See exhibit 8), which was the first
commercial vehicle designed and developed indigenously. In 2005, it introduced Galaxy
30.25 and Galaxy 33.25 in the 25-tonne segment along with an entry in the 4x2 tipper market
in order to expand its presence in HCVs.
Eicher Motors functioned through a three-tier service network consisting of authorized

distributors, service centres and company trained private mechanics. The vehicles were sold
and serviced through a network of over 576 Authorized Contact Points all over India,
supported by service centres and over 4500 company trained private mechanics.
Eicher Motors had acquired formidable expertise in designing and developing commercial
vehicles. It had a world-class R&D centre manned by a team of brilliant engineers and
equipped with latest Computer Aided Design (CAD) and Computer Aided Engineering
facilities. Leveraging its in-house expertise, this unit had successfully developed a wide range
of commercial vehicles to meet varying customer needs. Such high-end technological
capability can enable it to introduce technically superior products in the markets in future,
threatening the market share of all the other players, including Volvo.
Swaraj Mazda Limited:
Swaraj Mazda Ltd. was a part of Swaraj group of companies. Established in 1983, Swaraj
Mazda Limited was promoted by Punjab Tractors Limited25. It had technical and financial
collaboration with Mazda Motor Corporation and Sumitomo Corporation, Japan for
manufacture of Light Commercial Vehicles (LCVs). In the last quarter of 2005, it signed a
technical assistance agreement with Japanese automobile major Isuzu to develop heavy
commercial vehicles like trucks and buses. It can emerge as a formidable competitor for
Volvo in the future.
The Commerical Vehicles Market Environment in India:
According to Society of Indian Automobile Manufacturers (SIAM), the commercial vehicle

segment clocked a growth rate of 22% in 2004-05, with Medium and Heavy Commercial
Vehicles (M&HCV) segment growing by 23% and Light Commercial Vehicles (LCVs)
growing by over 21% (See Exhibit 9).
The export of commercial vehicles increased to an all time high of touching 30,000 growing
at a rate of 72% in 2004-05 (See exhibit 10). A total of 120,373 commercial vehicles were
sold during the period from April to November 2005 showing an increase in sales of 0.9%
over the same period in 2004-05 (See exhibit 11, for more details).
According to the figures given by SIAM, Tata Motors was the market leader in the
commercial vehicles segment, followed by Ashok Leyland, Eicher Motors and Swaraj Mazda
24
This state-of-the-art plant had a total area of 72 acres with 18000 sq. mtrs as the covered
area. The plant housed some top-of-the-line equipments, a robust infrastructure and had an
annual production capacity of 30,000 vehicles.
25
Punjab Tractors Ltd (PTL) was one of the leading manufacturers of tractors in India.
Punjab Tractors was promoted mainly by Punjab State Industrial Development Corporation
Limited.
in 2005-06. Volvo India had a miniscule market share and was yet to make a significant mark
in the commercial vehicles segment.
VOLVO’S FUTURE IN INDIA:
Volvo was a relatively new player in 2006 in the commercial vehicles segment of the Indian
automobile industry. In order to face the growing competition in this segment and to sustain
and grow in this booming market, Volvo had chalked out its own set of strategies:
1. In January 2006, it had entered the 10,000 units a year intra-city bus market of India.
With the growing consumer income, Indians are demanding comfortable intra-city
public transport. This provides Volvo an opportunity of repeating the success that it
received in the inter-city bus segment in this segment also.
2. It expected to increase the export of truck components from India, which had
already reached Euro 50 Million mark in 2005 and the company planned to increase
it to Euro 70 Million in 2006.
3. It planned to move in the high-performance trucks segment, which was growing by

about 30 per cent annually and Volvo trucks were popular in sectors like mining,
heavy goods transportation and applications that demanded high-safety and heavy
haulage.
4. It planned to enter into the booming passenger car market of India through its
offerings: XC90 and S80 by the end of 2006 or early 2007.
5. In September 2006, Volvo signed an agreement with Jaico Automobiles26 to start a

joint company in India for production of bus bodies based on Volvo Buses’ body
technology. Volvo had majority stake (70%) in the new company and planed to build
a new plant with a capacity of 1,000 bus bodies per year. The bus bodies would
primarily be used for Volvo buses and coaches in the Indian market. But, the new
company would also investigate possibilities to export buses to other Volvo markets
in Africa, the Middle East and Southeast Asia.
Volvo was positive about its aspects in India. Its management thought that work was being
done in India on a lot of things that came together to create the circumstances enabling an
efficient Commercial Vehicle Industry. These included consolidation of loads and fleet
operations; logistics focus; hub & spoke system; regulations on safety; reliable and modern
technology; and better roads and infrastructure. The company expected that expanding
traffic, stricter emission and safety rules, and rules on over-loading would encourage the
demand for its trucks. Volvo had seen 16 per cent sales growth in the first five months of
2006 itself. The company estimated that operations on double-shift basis27 might have to be
commenced by 2008.
But, the going will not be easy for Volvo in India. On one side, it faced stiff competition
from the established Indian players like Tata, Ashok Leyland, etc. On the other side, the
26
Jaico Automobiles is a company in the Azad Group. Formed in 1957, the Azad Group
established its first body plant in Delhi. Azad Group today carries out body building
production in Bangalore and Jaipur
27
Volvo was running single shift – producing 1200 vehicles p.a. - in its factory at Hoskote.
competition was coming in the form of new MNC players who were ready to invade this
market with their latest offerings.
In 2006, a number of new multinational players had either entered or were planning an entry
into the Indian commercial vehicles market. Korean major Hyundai planned to roll out the
one-tonne light commercial vehicle Porter in India. The Swedish firm Scania, in which
Volkswagen is a significant shareholder, also indicated its intent to enter the Indian market.
DaimlerChrysler India had formally launched its Actros range of commercial vehicles in June
2006. According to the industry analysts, these vehicles will be pitted in the market against
products from Volvo. German major MAN signed a 30:70 joint venture agreement with
Force Motors to manufacture heavy trucks while Mahindra & Mahindra had signed a 51:49
agreement with US major ITEC to produce medium and heavy commercial vehicles28.
Hence, the commercial vehicles market in India was turning out to be cut-throat battlefield
for all the major players who had a presence in this market.
So far Volvo has performed fairly well in India, but, would it be able to sustain its current
performance and show further growth considering the competition from other major
commercial vehicle producers in India? Can it become a major player in the commercial
vehicle segment and generate higher volumes in future? Only time would be able to give
answers to all these questions.
28
Ref: http://www.thehindubusinessline.com/2006/06/25/stories/2006062502540200.htm
accessed on 12th Sept. 2006.
APPENDIX:
Exhibit – 1: Volvo FH12
Source: www http://www.lsi.upc.es/~lcmolina/media/volvo-fh12.jpg
Exhibit – 2: Volvo B7R
Source: http://www.rajnationalexpress.in/#
Exhibit-3: Volvo’s Operations In India:
June 1998: The first Volvo truck rolls out from the Hoskote factory - quality audited as per
Volvo's standard & global auditing process.
June 1999: Volvo factory in Hoskote is certified ISO 9001 - 12 month from the date the
first Volvo truck rolled out in India
Dec 1999: ISO 9001 certification for Volvo in India extends to all major support and sales
offices.
February 2001: Volvo factory & Service and Parts Centre at Hoskote are certified for ISO
14001.
October 2001: Volvo rolls out its first bus produced in India.
January 2002: Volvo rolls out its 1000th truck in India.
December 2002: Volvo in India launches the new FM9 Tipper for construction
applications.
April 2003: Volvo India starts to export buses to Bangladesh.
2004: Volvo starts its operations in North India.
January 2005: Volvo India starts to export trucks to South Korea.
January 2005: Volvo enters Eastern Region of India.
January 2006: Volvo introduces intra-city buses in India, in the city of Bangalore.
February 2006: Volvo India inaugurates its new technology center at Bagmane Park in
Bangalore to support Volvo Group activities in the areas of IT and Truck product
development.
April 2006: 1000th Volvo B7R bus rolled out from Volvo’s Hoskote Plant.
June 2006: Volvo introduces new generation of FM9 and FM12 trucks.
Source: http://www.volvo.com/trucks/india-market/en
in/newsmedia/pressreleases/pnt_press_search.htm
Exhibit 4: Volvo FM12 Truck Volvo FM 9 Truck
Source: http://www.autocentre.ua/truck/03/12/images/02/VolvoFM-12.jpg
http://www.dhsdiecast.com/_images/product_photos/PH04447_S.jpg
Exhibit-5: EU Emission Standards for HD Diesel Engines, g/kWh (smoke in m-1)
Tier Date & Category Test Cycle CO HC NOx PM Smoke
Euro I 1992, <85 kW ECE R-49 4.5 1.1 8.0 0.612
1992, >85 kW 4.5 1.1 8.0 0.36
Euro II 1996.10 4.0 1.1 7.0 0.25
1998.10 4.0 1.1 7.0 0.15
Euro III 1999.10, EEVs only ESC & ELR 1.5 0.25 2.0 0.02 0.15
2000.10 ESC & ELR 2.1 0.66 5.0 0.10 0.8

0.13*
Euro IV 2005.10 1.5 0.46 3.5 0.02 0.5
Euro V 2008.10 1.5 0.46 2.0 0.02 0.5
•
- for engines of less than 0.75 dm3 swept volume per cylinder and a rated power speed
of more than 3000 min-1
Source: http://www.dieselnet.com/standards/eu/hd.html
Exhibit 6: Tata Novus
Source: http://www.deccanherald.com/deccanherald/nov152005/img/tn_9.jpg
http://www.thehindubusinessline.com/2005/12/15/images/2005121502360201.jpg
Exhibit -7: Ashok Leyland Cargo Range of Trucks
Source: http://www.ashokleyland.com
Exhibit 8: Eicher Jumbo 20.16
Source: http://trucks.eicherworld.com/product1.aspx?id=9&mid=19&bioid=6&leftid=9
Exhibit 9: Automobile Domestic Sales Trends (in Nos.)
Category: 2001-02 2002-03 2003-04 2004-05 2005-06
M&
89999 115711 161395 198506 207446
HCVs
LCVs 56672 74971 98719 119924 143237
Source: Society of Indian Automobile Manufacturers (SIAM)
Exhibit 10: Automobile Exports Trends (in Nos.)
Category: 2001-02 2002-03 2003-04 2004-05 2005-06
M&HCVs 4824 5638 8188 13474 14096
LCVs 7046 6617 9244 16466 26485
Source: Society of Indian Automobile Manufacturers (SIAM)
EXHIBIT 11: SIAM SALES REPORT FOR M&HCVS AND LCVS FROM APRIL – NOVEMBER 2005
(SOURCE: SOCIETY OF INDIAN AUTOMOBILE MANUFACTURERS (SIAM)
Commercial Apr-Nov 04- Apr-Nov 05- Market share Growth % Exports

Vehicles 05 06 %
Tata Motors 79,614 73,538 61.1 -7.6 4,807
Ashok Leyland 27,577 33,406 27.7 21.1 2,825
Eicher Motors 8,043 8,700 7.2 8.2 318
Swaraj Mazda 3,573 4,080 3.4 14.2 115
Volvo India 396 569 0.5 43.7 125
Tatra Udyog29 71 80 0.1 12.7 0
Total M&HCVs.. 119,274 120,373 100.0 0.9 8,190
29
Tatra Trucks is Czech company, which is 90 percent owned by NRIs. It is promoted by
Vectra group of the UK. The company assembles engines and makes truck bodies at its
Hosur plant in Tamil Nadu, India. It has a manufacturing capacity of 1,000 units annually.
ADDITIONAL READINGS AND REFERENCES:
1. “ALL to set up plant in Iran”, PTI, Wednesday June 20, 2004.
2. “ALL targets $100-mn exports”, PTI, Tuesday June 15, 2004.
3. “Ashok Leyland net up at Rs 87.32 cr”, Economictimes.Com, Friday, June 11, 2004.
4. “Ashok Leyland net up 63% to Rs 38 cr”, Times News Network, Saturday, January 24,
2004.
5. “Ashok Leyland plans China, Pak foray”, PTI, Monday, January 19, 2004.
6. “Ashok Leyland to acquire AVIA truck”, http://www.domain-

b.com/companies/companies_a/ashok_leyland/20060719_acquire.html
7. “Bus and truck sales zoom in April-October 2004”, PTI, Sunday, November 21, 2004.
8. Chopra, Sonia “Volvo starts developing India as a sourcing hub for engineering services to
support the group's expansion in Asia”, Oct. 12, 2005,
http://www.indiadaily.com/editorial/4949.asp
9. “CV sales zoom 27.2% in Apr-Oct.”, PTI, Monday, November 22, 2004.
10. De Souza Brian, “We are in Niche segments: Volvo”, Business, Hindustan Times,
Sunday June 13, 2004.
11. “DaimlerChrysler to enter truck market — Plans launch of Actros in early 2005”,
http://www.indiacar.net/news/n7717.htm
12. “DaimlerChrysler launches Mercedes-Benz Actros trucks in India”, http://www.domain-

b.com/companies/companies_d/daimlerchrysler/20060623_mercedes.html
13. “Eicher Motors exploring options to acquire new tech”,

http://www.thehindubusinessline.com/2005/03/03/stories/2005030302640200.h
tm
14. “From country roads to global highway”, Business Standard, Feb 23, 2004.
15. Giriprakash K., “Volvo sees record growth in 2004 — To set up engg centre in Bangalore”,
http://www.thehindubusinessline.com/2004/11/26/stories.
16. http://www.volvo.com/trucks/india-market/en-in
17. http://www.volvo.com/trucks/india-market/en-
in/newsmedia/pressreleases/pnt_press_search.htm
18. http://www.ashokleyland.com
19. http://www.tatamotors.com
20. http://www.eicherworld.com
21. http://auto.indiamart.com/swaraj-mazda/
22. http://siamindia.com/
23. http://www.cybersteering.com/pulmain/motoring/bulletin/b_arch2.html
24. http://www.swarajenterprise.com/swaraj_mazda.htm
25. http://www.domain-b.com/companies/companies_a/ashok_leyland/index.html
26. http://www.domain-b.com/companies/companies_t/tata_motors/index.html
27. http://www.domain-b.com/companies/companies_s/swaraj_mazda/index.html
28. “M&M signs JV with US truck maker Navistar”, http://www.domain-

b.com/companies/companies_m/mahindra/20051213_truckmaker.html
29. “MNCs driving into Indian commercial vehicles space”,

tm
30. “Pollution curbs to slow India bus, truck sales”,

http://www.detnews.com/2005/autosinsider/0503/24/autos-126407.htm
31. “Tata motors drives into wall street”, Financial Express, Sept 28, 2004.
32. “Tata Motors rolls out Tata SFC”, Financial Express, Sept 14, 2004.
33. “Tata sees 50% growth in truck exports”, Business Standard, August 23, 2004.
34. “Tata Motors may launch Daewoo trucks shortly”, Financial Express, August 17, 2004.
35. “Tata Motors is king of the road”, Business Standard, August 11, 2004.
36. “Tata Motors rolls out latest turbo trucks”, The Asian Age, August 10, 2004.
37. “Tatas set to roll in Daewoo trucks”, Business Standard, July 13, 2004.
38. “Tata Motors aims to sell 12,000 ICVs this fiscal”, Financial Express, June 17, 2004.
39. “Tata Motors rolls out new 6-tn truck”, Financial Express — May 12, 2004.
40. “Tata Motors vehicle sales surge 58% in April 2004”, Financial Express, May 7, 2004.
41. “Tata Motors reports 43% sales growth in FY04”, Economic Times, April 9, 2004.
42. “Tata Motors to hawk Daewoo trucks in Middle East, Far East”, Business Standard,
April 5, 2004.
43. “Tata vehicles may hit South Korean roads”, Business Standard, April 5, 2004.
44. “Tata Motors takes reins of Daewoo CV”, Business Standard, March 30, 2004.
45. “Tatas go off the beaten track to push truck sales”, Business Standard, March 17, 2004.
46. “Tetra’s heavy truck to hit Indian highways”, PTI, Monday, May 03, 2004.
47. Thimmaya P P, “Swedish Giant’s Jumbo Strides on Indian Roads”, Economy &
Business, Deccan Herald, Monday, August 09, 2004.
48. Ullati Parvathy, “Volvo sees India as Asia sourcing hub”,

http://www.rediff.com/money/2004/may/31bpo.htm
49. “Volvo India to reach operational break-even in 2004”, Times News Network, Tuesday
June 1, 2004.
50. “Volvo India aims at double digit growth”, PTI, Monday Sept 3, 2004.
51. “Volvo counts on growing business in overseas market”, Times News Network, Wednesday
December 24, 2003.
52. “Volvo Launches two new trucks – Expects 15% growth in revenue”, Business Line (Online
Edition), Thursday, August 28, 2003.
53. “Volvo plans to double bus sales”, PTI, Wednesday, November 17, 2004.
54. “Volvo India Truck Sales up 65%”,

tm
55. “Volvo India Plans to bring in CNG Models”,

http://www.deccanherald.com/deccanherald/Jan162006/business1726552006115.
asp
56. “Volvo to increase sourcing from India by 40 pc”,

tm
57. “Volvo India to increase capacity utilization”,

http://www.blonnet.com/2006/08/11/stories/2006081104570300.htm
58. “Volvo introduces new generation trucks”,

http://www.hindu.com/2006/06/17/stories/2006061704421800.htm
59. “Volvo to buy more truck parts from India”,

http://www.hindustantimes.com/news/181_1721927,00020010.htm
60. “Volvo To Sell Cars In India”,

http://media.ford.com/newsroom/feature_display.cfm?release=23361
61. “Volvo in talks with Hindujas”,

http://timesofindia.indiatimes.com/articleshow/1933737.cms
62. “Volvo Car Corporation Will Begin Selling Cars in India”,

http://today.reuters.com/news/articleinvesting.aspx?view=PR&symbol=VOLV.
O&storyID=110505+28-Jun-2006+BW&type=qcna
63. “Volvo to float subsidiary, roll out car this year”,
http://timesofindia.indiatimes.com/articleshow/1689009.cms
64. “Will Leyland make Volvo buses?”,

http://auto.indiatimes.com/articleshow/1935034.cms
The Management Case Study Journal is available online at:

http://www.ojs.unisa.edu.au/index.php/MCSJ
and is produced by the International Graduate School of Business:
http://business.unisa.edu.au/igsb/
University of South Australia: http://www.unisa.edu.au/
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Volvo in India: Analyzing a MNC's Strategies in a Developing Market

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ICFAI Business School, Hyderabad

The case discusses the performance of Swedish commercial vehicle major AB

Mr. Eric Leblanc, Managing Director, Volvo India1.

Strategies of Volvo India:

As Volvo India’s products were priced at a premium as compared to local competition,

Volvo’s Major Competitors in India:

Eicher Motors23 was founded in 1982 to manufacture a range of reliable, fuel-efficient

Eicher Motors functioned through a three-tier service network consisting of authorized

Swaraj Mazda Limited:

The Commerical Vehicles Market Environment in India:

According to Society of Indian Automobile Manufacturers (SIAM), the commercial vehicle

VOLVO’S FUTURE IN INDIA:

3. It planned to move in the high-performance trucks segment, which was growing by

5. In September 2006, Volvo signed an agreement with Jaico Automobiles26 to start a

Exhibit – 1: Volvo FH12

Source: www http://www.lsi.upc.es/~lcmolina/media/volvo-fh12.jpg

Exhibit – 2: Volvo B7R

January 2002: Volvo rolls out its 1000th truck in India.

April 2003: Volvo India starts to export buses to Bangladesh.

2004: Volvo starts its operations in North India.

January 2005: Volvo India starts to export trucks to South Korea.

January 2005: Volvo enters Eastern Region of India.

Tier Date & Category Test Cycle CO HC NOx PM Smoke

Euro I 1992, <85 kW ECE R-49 4.5 1.1 8.0 0.612

1992, >85 kW 4.5 1.1 8.0 0.36

Euro II 1996.10 4.0 1.1 7.0 0.25

1998.10 4.0 1.1 7.0 0.15

2000.10 ESC & ELR 2.1 0.66 5.0 0.10 0.8

Euro IV 2005.10 1.5 0.46 3.5 0.02 0.5

Euro V 2008.10 1.5 0.46 2.0 0.02 0.5

Exhibit 6: Tata Novus

Exhibit -7: Ashok Leyland Cargo Range of Trucks

Exhibit 8: Eicher Jumbo 20.16

Exhibit 9: Automobile Domestic Sales Trends (in Nos.)

LCVs 56672 74971 98719 119924 143237

Source: Society of Indian Automobile Manufacturers (SIAM)

Exhibit 10: Automobile Exports Trends (in Nos.)

Category: 2001-02 2002-03 2003-04 2004-05 2005-06

M&HCVs 4824 5638 8188 13474 14096

LCVs 7046 6617 9244 16466 26485

Source: Society of Indian Automobile Manufacturers (SIAM)

Commercial Apr-Nov 04- Apr-Nov 05- Market share Growth % Exports

Tata Motors 79,614 73,538 61.1 -7.6 4,807

Ashok Leyland 27,577 33,406 27.7 21.1 2,825

Eicher Motors 8,043 8,700 7.2 8.2 318

Swaraj Mazda 3,573 4,080 3.4 14.2 115

Volvo India 396 569 0.5 43.7 125

Tatra Udyog29 71 80 0.1 12.7 0

Total M&HCVs.. 119,274 120,373 100.0 0.9 8,190

1. “ALL to set up plant in Iran”, PTI, Wednesday June 20, 2004.

2. “ALL targets $100-mn exports”, PTI, Tuesday June 15, 2004.

6. “Ashok Leyland to acquire AVIA truck”, http://www.domain-

12. “DaimlerChrysler launches Mercedes-Benz Actros trucks in India”, http://www.domain-

13. “Eicher Motors exploring options to acquire new tech”,

28. “M&M signs JV with US truck maker Navistar”, http://www.domain-

29. “MNCs driving into Indian commercial vehicles space”,

30. “Pollution curbs to slow India bus, truck sales”,

48. Ullati Parvathy, “Volvo sees India as Asia sourcing hub”,

54. “Volvo India Truck Sales up 65%”,