Stability Of Policies, Tax Regimes And An Importation Versus Exportation Are The Driving Factors
Richard Snijders was appointed last year in April as the Vice-President for Asia-Pacific region, Volvo Cars. Prior to this, he served as the Managing Director of Volvo Cars, Netherlands from November 2012- April 2018. He has been in the automotive business for over 30 years now. During his career, he has held various positions in different markets across the globe. Having worked in China, Japan, Netherlands, Australia, Gothenburg, New Zealand, UK and Europe; he comes with an enriching experience and knowledge of diverse cultures and market dynamics. He spoke to Siddharth and Avishek from BW Businessworld recently and below are the impressions from the interview:
Q1. Volvo Cars has been present in India for more than a decade now. So, are you happy with the journey so far?
I feel last year was a good one for luxury car sales here in India. Yes, it has been 10 years for us in India and I must say that we are in a very good frame of mind. If you see, it was only in October 2017 that we started assembling cars here (in India). So, I think we're still in the investment phase in India and it’s still early days (for Volvo). We believe it's worth our while to be here. I think the move to assemble cars locally was an important decision that we have already made. You know, we've seen some of our colleagues (General Motors) pulling out of India. So for us, yes, last year was a great one as we got great recognition for our cars with XC 40 winning ICOTY’s ‘Premium Car of the Year’ award and the XC60 being the runner-up. We grew 30% in sales which was probably the best growth rate by any luxury car brand last year. We have had a great run with our dealers as we opened about six dealers last year. Now, we have got about 95% coverage of the Indian geography. So, we are well represented. We've good dealer partners with good buildings and outfits. I think last year was a phenomenal year when you look at all these things. But you know it better than I, that India is a difficult place to operate in. We have had lots of challenges such as change in tax slabs, policies and so on. It's not been a very stable environment to work in.
Q2. How important India is for Volvo Cars in the Asia Pacific market?
In the APAC region, it's probably one country which gets the most attention. The team here would probably be a bit upset because they see it maybe as interference rather than a help but, as I said earlier, we see India at a stage where China was back in 2004. The potential is the same and for this very reason, we need to be very close to the Indian market. From this perspective, it is very critical that we get things right here.
Q3. 2018 was very successful for Volvo Cars in India. So what's your strategy for India in 2019?
We need to consolidate and make sure that the investments that we have put in India start to mature and make good business case for us. The dealers have really stuck their neck out now. This year I think we'll take some breadth and really show that we can grow without needing car launches etc. We will be the first car maker to launch a locally assembled plug-in hybrid SUV in India. We may launch the S60 at the end of the year or maybe at the beginning of next year. As you know, we've been very busy launching cars and establishing dealerships. But this year we need to show that we can sell cars, satisfy the customers and build on the customer base we’ve established over the last couple of years. We're not going to build dealerships this year. So it’s a different approach. It's maturing as a business and I think only when you have operational maturity, you can go to the next growth phase. Otherwise, we're just chasing (volumes) and burning so much energy that may affect the quality of the operations.
Q4. As we know, Volvo is a subsidiary of the Chinese automotive company Geely. So how different has been the approach towards India post the acquisition?
I've been with the company (Volvo Cars) for over 30 years, and say this with honesty (that) when I started with Volvo, we were part of the ‘Big Blue Oval’ (Ford) with (product lines such as) trucks and buses and were part of the bigger group. We were not really independent because we had to pay attention to the overall result under ‘Ford’. Well, I think what I can tell you that after coming out of Ford (Volvo’s former owner), this is the first time I think we are truly independent since we were bought by Geely. Apart from the Chairman Li (Shufu), I've not had any real contact with Geely colleagues. They leave us on our own and we get the approval for the investments (from them). We think we are wiser today and doing good under the Geely ownership. I don't think many car companies have done what we have done in all these years. We have built three or four factories in China and one in the US. We brought out a complete new range of cars which win award after award, which for us also is unheard of. We've got cars which are truly superior to the competition. We've grown from 370 units to 70,000 units to now 640,000 units. We’re profitable now and have established Polestar (a performance company and brand, owned by Volvo).
Q5. As you know SUVs are gaining so much eminence, will you be like enhancing your focus on SUVs?
Yeah, I think (buying an) SUV is clearly the global tendency (as sales of) sedans are declining even In Europe. (Sales of) Wagons are declining, and SUVs are the car models by choice. I’ve always preferred them. Those (SUVs) are the new wagons and fit everybody's purpose, whether it's for a single person (or for) two people-family, everybody with some kind of active lifestyle. And thus, I think that is one area where you need to be stronger. Fortunately for us, it seems all our SUVs are straight out of the box. What is the role of sedans and what is the role of Wagons? What are the next top hatchbacks – that is all part of our discussion now internally. But we'll stick to conventional SUVs and are not going to go to SUV coupes.
Q6. You have maintained that 50% of all your vehicles will be electric-driven by 2025. So what is your roadmap that you have prepared for India?
Well, if I can start specifically for India, we believe that we should be an electric car brand in the country. That's where the opportunity lies but a lot will depend on policies because it's still very expensive for us to produce cars and we still pay a lot of taxes on our cars. It's difficult to sell them in a commercially attractive way. Globally, that's what we set out to do. We were the first ones to announce that we pull out of diesels (powertrain) and we've chosen electricity (driven cars) as our end game and we are on that journey. Now as we speak, you know we started with plug-in hybrids. We were the first (OEMs) to come out with plug-in hybrids in India. I worked in (Volvo) Holland before this job (of APAC Head) and we were the first (OEM) to have V60 plug-in hybrids there. At that time, even if an accountant (would) look at the calculation of a plug-in hybrid, he would say that (building them) makes no business sense. But it's part of our DNA to be sustainable and environmentally-conscious that we decided to get into this and since then we've been probably ahead of everybody else when it comes to plug-in hybrids. That's what we now do in India and will be the first (OEM) again to industrialize them here. The end game will be full electric but a lot will happen between now and that (of going) full electric.
Q7. Most of your peers have self-owned assembly facilities. So don't you think that makes more business sense as that will reduce the prices of your products and will ultimately give you more numbers?
I would definitely say yes. But, if I ask the big boss in Sweden (where Volvo HQ is based) and he says ‘Well sorry but the US and China have priority (over India) when it comes to building factories’. So in that light, we've had two factories almost all my entire (professional) life - one in Belgium and one in Sweden. And now we have six factories. But I must say this model is again the model which we actually are very happy with. It is a very efficient outfit and only time will tell whether we will go for manufacturing here in India.
Q8. So there's also a lot of buzz on disruptions such as connected Vehicles. So how do you take on these disruptions?
I don't want to boast about ourselves, but I think we are seen a bit as the disruptor. You know, I think, we were the first among those who decided to go out of motor shows and then we declared that we would go for electric cars. We also announced that we would pull out of diesels. Then we started a subscription-based (on) that we sell cars now to the customer. So, we are probably part of that and are causing the disruption. It's a huge challenge and we were also again the first (OEM) to state that by 2030 we would have a high percentage of autonomous driving cars. We sold 40,000 cars to Uber in the US because we are leading the autonomous car development with them. We did the same with Baidu in China. We are such a small brand and our leadership recognized that pretty quickly and later we started partnerships with Uber, Baidu and Zen UVT. So, we've set up all these partnerships to grow faster now. We actually plan to go much faster, and want to do everything in-house which the competition does a lot more. We feel we need to take that road to be faster and more disruptive.
Q9. Electric cars get a lot more incentives globally. What is your viewpoint on the tax situation in India for electric cars?
Well, they are very high. That's the only thing I can say. It's a big impact for us to develop some scale and I guess this is not for the Indian government. But that's always with taxes. I think sometimes governments have to decide. What is the real objective? Is it to progress in safety and environment and so on or is it to collect taxes? And that is always a very difficult balance for the governments to play. You know, I come from Holland where cars are very highly taxed. They announced they want to have a higher amount of electric cars by incentivizing them. Then it was too successful. So, later on, they switched off the tap and started taxing electric cars again. So it's a difficult balance. But it needs if you want to progress in technology, it needs to be a collective incentive. I think that's what government should take out. The car manufacturers can move quite quickly but it needs joint ownership.
Q10. You just mentioned a while back that India would be the next China. So what would be the driving Factor?
Stability of policies and tax regimes and an importation versus exportation are the driving factors. I think a stable operating environment (is desirable) and we've been here now just over 10 years. It's been very volatile and we've really had to change and adjust quickly (post) GST implementation, demonetization, diesel (engine) ban, etc.
Q11. Product electrification is big for Volvo. Is it on the Forefront? So, what happens to Polestar?
Well, yeah Polestar is the leading star if you put it like that. They will develop the electric (vehicle) technology and will bring out the car first and then we take that powertrain into our cars. So we've decided with Polestar, we should harness all that energy on electric (powertrain) into one company because it's very difficult for Volvo engineers who have worked on petrol engines all their lives to switch to electric all of a sudden. But we are not looking at bringing Polestar to India.
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