India yields insights for Volvo

8 January 2013

NEW DELHI: Volvo, the automaker, has benefitted from boosting its marketing spend, targeting smaller cities and focusing on luxury in India, which is seen as increasingly offering insights for other countries.

The company sold 810 units in India in 2012, compared with 325 in 2011, making it the fastest-growing player in the high-end category. It hopes to deliver 1,200 units in 2013.

Tomas Ernberg, Volvo Auto India's managing director, said India's car market should hit 20m units in size by 2020, of which premium vehicles will take around a 15% share, an opportunity bigger than the entire auto sector in Sweden, Volvo's home nation.

"One should look at India as a long term investment," he told the Business Standard. "India is an underdeveloped market and it has long way to go. Opportunities are fantastic for car manufacturers like us and we have taken India as a serious market."

Volvo's share of the Indian luxury car category rose from 2.8% to 4% on an annual basis in 2012, and by 2020 it hopes this figure will reach 15%, aided by the roll out of increasingly high-end cars.

"We will never enter the mass market, instead we will go the other way. We will launch more luxury, premium and advanced vehicles," Ernberg said.

As an example of this approach in action, the new V40 Cross Country, set to be launched in May or June 2013, will go up against the BMW X1 and Mercedes B Class.

Ernberg revealed this model will be "expensive compared to [the] competition", but is expected to yield 15% of the company's sales in 2013.

Volvo has also doubled its marketing budget in India to 5-6% of its turnover, a total it believes is ahead of the 2-3% category norm. "Our brand image is still low in India," Ernberg said.

Another strategic shift which has boosted the firm is specifically targeting second tier cities, meaning its share in Hyderabad has expanded from low single digits in 2011 to 22% in 2012.

"Lots of brand building and customer-related activities were conducted including [a] new IT infrastructure to connect with the customers and more customer engagement programmes including touchpoints in restaurants, night clubs, polo, golf, road shows and others," said Ernberg.

"Now we are taking this learning across the country and even Sweden took notice of this and is studying whether it can be replicated in Belgium."

Data sourced from Business Standard; additional content by Warc staff