Rajinder Singh Sachdeva, Chief Operating Officer, VE Commercial Vehicles speaks to Mayank Dhingra on the collaboration with Volvo, the impact of demonetization, BS IV and GST on Volvo Eicher and governments push towards electrification and its impact on CVs.
What was the premise behind the collaboration with Volvo and what has it brought to the table until now?
The joint venture with Volvo was done with an aim of taking the highly advanced technology from the Swedish giant, developing it in India by deploying a frugal way of working, and offering relevant modernisation to Indian customers at a reasonable cost.
While Volvo sells trucks and buses under its own independent identity, these products are highly niche and sit at the top of the pyramid in terms of price positioning. To cater to a larger audience and for mass proliferation, it was necessary to localise the technology and produce it in India.
Our new cabins, which have come in from Volvo have been 100 percent localised, while engine technology still sees scope for some 13 percent improvement, with the current localisation structure standing at roughly 87 percent. With cabin localisation, we are able to offer highly advanced designs and are now able to compete with Daimler and Tata Motors. The collaboration has also brought in quality manufacturing systems, as well as testing and validation equipment inside the factory premises.
One major aspect of the joint venture is also the setting up of a powertrain division, in the form of an engine manufacturing plant — Volvo Eicher Powertrain (VEPT) — built on a 10-acre site and situated adjacent to the main truck manufacturing factory. VEPT, along with being the sole source of engines for the manufacturing of trucks and buses, also supplies completely built Euro 6 units to Volvo’s assembly plants, in France and Thailand.
A clear example of frugal Indian working methodology is in the fact that the made-in-India engine is 30 percent cheaper than its counterpart being manufactured in Europe.
With technology ready in our hands, we are confident of being prepared for the upcoming BS IV to BS VI transition in 2020 in India and with volumes scaling higher, we only expect to further localise the technology with some of the key role players in BS VI, including Johnson Matthey, BASF and Unicor already having a local presence.
Volvo Eicher is a prominent player in the intermediate CV segment. Are you eyeing the HD market and what is going to be your game-plan towards this goal?
Prior to our JV with Volvo, Eicher Motors had a negligible one percent presence in the extremely challenging HD segment. With the most recent Pro 8000 series, we aim to seriously take on the HD space and are working to improve on three key parameters — product, front end, and aftermarket support.
While we are quite confident of having a highly competent offering in our line-up, we are working on enhancing the competency of our sales workforce through rigorous training workshops. The current network of 258 touch-points across the country also calls for proficient manpower which could work on increasingly complex technology. We are focusing on enhancing our manpower capabilities, with a dealer mechanic training course, and including newer KPIs to take post-workmanship feedback from customers.
How have the recent industry disrupters like demonetisation, BS IV and GST impacted Volvo Eicher?
The last couple of years have seen the automotive industry go through a series of challenges, starting with demonetisation drive launched in November 2016. With sales hitting rock bottom, we needed a strong control over our inventory and had to cut down on fresh production.
The next disruption came in the form of the BS III to BS IV transition in April this year. While it was the Court’s orders which led to a confusing situation, we were sitting at a minimal stock of 1,200 units until the end of March 2017. While the number was not large, we were successfully able to dispose off the stocks after converting them into BS IVcompatible vehicles.
The most recent and third disruptive step from the government’s end has been the implementation of the GST regime from July 1. It is a welcome step, which will go a long way in improving the business environment in the country. We were entirely ready in the form of system readiness on June 30 itself, and were able to make a smooth transition, without losing even a single day of production. Moreover, being closely associated with the logistics industry, it is my pleasure to see that GST has already improved logistical turnaround times, by up to 40 percent, with the elimination of inter-state toll posts.
How would you describe the business outlook for FY2018?
With the impact of demonetisation and switching of emission norms also flowing into FY2018, the first quarter of the financial year has borne a severe brunt, with sales slightly picking up only in July. The domestic industry wide MHCV numbers stood over 71,000 units between April-July 2017, a dramatic 23 percent de-growth.
LCVs were slightly better at close to 140,000 units during the same period and posting a growth of 10.5 percent. The initial three months were slow due to the incoming of the GST which was just around the corner, as well as a lot of pre-buying of BS III trucks which happened until March 31, before the start of the new fiscal. On the other hand, with a good monsoon, and GDP expected to touch the 7 percent mark in the latter half of the fiscal, I believe that Q3 and Q4 are supposedly going to be the best quarters for this assessment year.
How do you view the government’s push towards electrification and its impact on CVs?
While electric technology could be a big game-changer from India’s perspective, the government needs to come up with a comprehensive electric technology policy. The charging infrastructure and the cost-to-value proposition are clearly the biggest impediments in the present day, and sincere efforts are required in these areas.
With Volvo being a leading developer of a lot of modern technologies, we are in a strong position to roll out such products when the time arises.
Also, we are creating a separate electrification vertical within our organisation, and a lot of R&D work is already being undertaken in this new direction. We are ready with our first electric bus, which is currently under validation. We soon plan to roll it out in collaboration with state entities, for intra-city travel applications. We have adopted an RD30 philosophy, which pushes us to allocate more resources in R&D, to reduce the time to market by 30 percent.
On the other hand, it is quite a different ballgame for trucks, where range needs to be extensive, as well as charging points need to be far and widely spread. Hybrids and fuel cells still remain an open option in this area. However, no matter the speed of the upcoming change in mobility systems, trucks will continue to be the last priority for electrification on the radar for some time, before a definite technology breakthrough is achieved.
(This interview was first published in the October 1, 2017 print edition of Autocar Professional)