Volvo Buses’ Region International encompasses operations in Asia, Africa, the Middle East and Australia, and has increased its order intake by 130 percent in one year despite the financial crisis. It is above all the economic growth in China and India combined with increased environmental awareness that is powering Volvo Buses’ business operations.
“About 80,000 buses are sold every year on the Asian market compared with just over 20,000 a year in Europe,” says Rune Lundberg, Senior Vice President Volvo Buses Region International.
“It is in Asia that we have considerable growth potential.”
In China, Volvo Buses sells vehicles through the joint venture companies Sunwin Bus and Silver Bus, which are co-owned with Chinese companies.
In June 2009, a billion-krona agreement of 1,500 buses was signed between Sunwin and an operator in Shanghai for the world expo in Shanghai in 2010. Thus the world’s largest fleet of Volvo buses – 7, 000 vehicles – can be found in Shanghai.
“In China and India we are seeing increasing numbers of mega-cities. This trend is paralleled by a massive urbanisation process that is generating an immense need for public transport,” explains Rune Lundberg.
“The city authorities understand the need for buses since there simply isn’t enough room for everyone to use private cars.”
Marina Petroleka is an expert in global infrastructure at Business Monitor International, a firm that specialises in business information analysis. She reveals that India’s and China’s investments in infrastructure are enormous.
“We are seeing the fastest urbanisation in China, where it is expected that 50 percent of the population will be living in cities by 2015. In India the corresponding figure is 32 percent. This trend means that massive numbers of people will need transport services. We generally say that ‘one billion Chinese used to cycle everywhere – and now they all want their own cars’,” she says.
“In India we can see how the fast-growing new middle class is prompting increased car sales. This has caused massive traffic congestion problems in Mumbai and New Delhi, so India has invested 32 billion kronor in building 45,000 kilometres of new motorway and is spending additional billions on the railways.”
Development of the new infrastructure is proceeding even faster in China.
“In China, decisions are taken more quickly and the state provides the financing. India is more dependent on cooperation with private financiers,” explains Marina Petroleka.
She relates that China’s foremost strategy is to build 2100 kilometres of metro tracks, primarily in cities on the east coast. It’s a programme valued at 117 billion dollars.
“Virtually all the strategies in China and India focus on building train and metro networks for commuters. I have seen pictures from China and New Delhi and one thing is clear: they are going to make the train and metro systems of the West look antique by comparison.”
Having said that, she also believes that the bus markets in China and India are important.
“Naturally, that’s just common sense. In cities with 20, 30 and 50 million inhabitants, a lot of people are going to need to take the bus,” she says.
In India, Volvo’s city buses are so far operating in eight cities, with their strongest foothold in Bangalore. The country’s government has taken a decision to modernise urban traffic in 63 cities by updating their bus fleets. 10 billion Swedish kronor are being invested, among other things in the purchase of 14,000 new city buses.
“This has given us a major upswing. We were quick to identify the need for comfortable buses for the rapidly expanding middle class in India. In order to agree to take the bus, they insist on modern low-entry buses with air conditioning and Western levels of comfort. And for their part, the bus operators want efficient buses with good fuel economy and high quality.
“These are buses that Volvo can offer but that the domestic manufacturers have not managed to produce thus far,” says Rune Lundberg. “In India it has become accepted to talk about ‘going by Volvo’ when referring to travelling in a luxurious bus that offers high comfort and quality – irrespective of the vehicle’s make!”
He also talks about the “green wave” in Asia that has a favourable effect on Volvo Buses’ operations.
“In both China and India there are state initiatives to provide cleaner transport. Both countries are gradually introducing the Euro 4 emission standard, which suits Volvo admirably since we already have these solutions in other parts of the world. The only obstacle is local availability of diesel fuel of sufficiently high quality, since the quality of the fuel affects how well the engine can purify the emissions,” reveals Rune Lundberg.
The markets are still dominated by domestic makes, and it’s still a challenge for Volvo to compete with expensive, European buses.
Hence, Volvo Buses focuses on increasing profitability and competitiveness.
“This market is still young. Our challenge is to offer a European standard at an Asian cost level. To achieve that, we must make a larger proportion of our purchases locally in these countries, and handle more of our product development on site in China and India.”
At present Volvo Buses has one factory in India and two in China. Rune Lundberg relates that the aim is to start exporting from these factories to the regional market.
“I regard our factory in Bangalore as one of our best. It was built according to our most modern production principles and our Indian staff are making huge strides. With this factory, we have an important base for future expansion in Asia, the Middle East and Africa.”
FACTS/ the Volvo Group’s bus operations in Asia
Volvo Buses is one of several bus companies within the Volvo Group with operations in Asia. Sales and manufacturing in the region is also being carried through Nissan Diesel and Renault Trucks, as well as VE Commercial Vehicles in India, a joint venture company created in 2008 through the Volvo Group and Indian Eicher Motors, containing Eicher’s truck and bus operations and the Volvo Group’s Indian truck sales.
The joint venture companies Sunwin Bus and Silver Bus in China are owned by Volvo and Chinese companies. In total, the Volvo Group sells around 10,000 buses in Asia each year and Volvo Buses represent half of the sales.