Kaushik Narayan, CEO and Founder, Leaptrucks, one of the largest marketplaces for selling trucks and buses in India with operations in Kerala and Karnataka, shares insights on the recent integration of Volvo Buses India and VE Commercial Vehicles
In the past week, Vinod Aggarwal, Managing Director and CEO, VE Commercial Vehicles (VECV), announced that VECV has signed a definitive agreement to integrate the operations of Volvo Buses India (VBI) with VECV. The agreement will cover the manufacture, assembly, distribution and sale of Volvo buses in India and other rights forming part of the business. Consequently, the bus manufacturing facility at Hoskote, Bengaluru, and all employees of VBI will be transferred to VECV. VBI is currently a division of Volvo Group India Private Ltd. (VGIPL).
We are also given to understand that post the completion of the transaction, VECV and VBI will consolidate their bus businesses into a newly formed bus division within VECV. This division will offer Volvo and Eicher branded buses, and will maximise synergies to capitalise on market opportunities. This strategy will be extended to exports, wherein the new bus division will offer products and services that are complementary with Volvo Bus India’s core product portfolio in selected international markets. Akash Passey will join as president-designate of the newly formed VECV Bus Division. He will repatriate to India for this role and report to Vinod Aggarwal.
The question is: why now? With India reeling under the impact of the ongoing pandemic, no segment has had to face the wrath of the pandemic worse than the mobility segment. Commuters have put safety above all other considerations and have been avoiding public transport altogether. Within this segment, the impact in the premium mobility segment has been worse than others. Most IT companies have extended their work from home policies and a large number of commuters for Volvo buses typically come from this segment.
To add to their woes, there have been significant quarantine restrictions for interstate travel which has also severely impacted the interstate premium bus transport segment. This will have a negative impact in terms of demand for Volvo buses in the short term. As we scramble to find a vaccine for the viral disease, we believe that the fortunes of Volvo Buses India will turn around in the medium to long term. VE Commercial Vehicles is looking at this integration over a long-term horizon. Aggarwal is both an astute leader and a master integrator. He was instrumental in bringing the Volvo Group and Eicher Motors together and has been the CEO of the JV since its inception.
Further, he has successfully integrated operations of Volvo Trucks India, which is already part of the JV. With the integration of Volvo Buses India into the JV, he is looking to build a market leader in the Indian passenger bus segment. There is tremendous respect and trust between the Volvo Group and Eicher Motors and this integration further builds on that bond. We believe that the integrations can bring many benefits for VECV. A few of the advantages include the following:
1) Brand Positioning: The addition of the premium Volvo bus brand immediately elevates the position of Eicher trucks and buses in general and their bus division in particular.
2) Optimisation Opportunities: This integration will throw open many opportunities for optimisation including:
- Lower input costs: VECV is one of the largest CV manufacturers in India. Volvo Buses India will benefit from lower input costs leveraging the deeper supply chain and procurement expertise of VECV.
- Integration of facilities: VECV can explore options to integrate bus body building into a single facility over the medium term which can bring significant synergies and cost savings.
- Larger distribution network: VECV has a deep all-India sales network of 143 touch-points that can be leveraged by Volvo Buses India to increase penetration in the market.
- Strong spare parts business: Volvo Buses India has a strong aftermarket business. VECV can leverage their expertise in the Eicher genuine parts business and try to replicate this success for Volvo bus parts making this part of the operation even more successful.
- Deeper customer support team: VECV also has an extensive service network of over 294 workshops that can be leveraged to support Volvo Buses India, significantly increasing its support reach.
3) Innovative New Products: Eicher Buses is a strong player in the light and medium duty bus space. Volvo Buses India is a strong player in the premium heavy-duty bus space. As indicated by Aggarwal, VECV will focus on developing new products in the mass premium segment to take on Ashok Leyland and Tata Motors. A few segments that will be of focus will be the sleeper segment, inter-city segment and electric buses.
4) State Transport Unit (STU) Business: Volvo Buses India has been a partner of choice for all STUs in the premium bus segment. It pioneered premium mobility in the Indian market and has very deep relationships with the STUs and influencers in the urban mobility segment. VECV will look to build deeper relationships with the STUs armed with a larger portfolio of products to become a major player in the STU business.
5) Visionary Leadership: Akash Passey, who was previously Senior Vice President (International) for Volvo Buses India will join VECV as President of its newly formed bus division, reporting to Aggarwal. He is a visionary leader with extensive experience of building a brand from scratch and was instrumental in building Volvo Buses India into a powerhouse in the premium mobility segment in India. He is also an expert in the mobility space and can instantly make VECV a strong contender for market leadership in the bus segment.
6) Exports: VECV has built a strong business exporting trucks and buses to South Asia and the Middle East. The addition of Volvo Buses India to VECV can help augment their portfolio of products in the export market. VECV is currently exporting Euro 6 engines to the Volvo Group in Europe. We believe that this integration will give them opportunities to export fully built buses to the rest of the world.
In summary, we believe that this integration will offer much-needed short-term support for Volvo Buses India as it tries to navigate through the challenges thrown up by the pandemic. With an extensive network, a wide portfolio of products from mass market to premium and synergies from the integration, VECV is looking towards a bright future in the bus segment in the mid to long-term horizon.