Martin Lundstedt - The board member, president and CEO of Scania
The board member, president and CEO of Scania began his stint at the company as a trainee in 1992. On a visit to India to inaugurate the Scania India Commercial Vehicles’ facility in Bangalore, he spoke to SumantraBarooah about Scania’s vision for India.
Is Scania still the most profitable truckmaker in the world?
Fortunately, we have kept that tradition. We are still the most profitable company. Today, we are operating at around 10 percent given the pretty harsh conditions in the European market. A 10 percent operating margin and if you take the historical perspective, some percentage points low right now. Volatility in Europe and a strong Swedish currency in contrast to the Indian rupee has given us some cost headwinds. Still, given those factors, we are quite satisfied with our 10 percent margin, which fortunately makes us the best in the industry for the time being.
Almost all European manufacturers are looking at increasing their share of outside-Europe business. Could you share your vision in this regard?
We have ambitions in Europe as well, both when it comes to market recovery when that happens as also our market share ambitions. We currently have a 14 to 14.1 percent market share in Europe. As far as developing economies go, we look at their GDP growth rates and India is certainly one of them, also Russia. In Brazil where we are, we have contributed to creating an efficient logistics system. That will take place here. A big population, high aspirations and increasing education levels are driving GDP in the long run. GDP is also always interlinked to logistics. From a macro perspective, we have to be in Asia, and in Southeast Asia. We are not mass market players, but if you take the Indian market of maybe 150,000 units a year, we’d say we would be satisfied with five percent of that!
If you have a premium positioning, the bigger segments remains unaddressed. Do you plan to have some kind of a presence there, maybe a sub-brand?
Scania represents fuel efficiency, uptime, a preferred brand of many drivers around the globe. But you also think about service, closeness to the customer. At the end of the day, if you have a truck or a bus customer, we must be like a family member in their business. We have a strong belief that the Indian market or other markets like Indonesia or Middle East are ones with big potential. We will have a critical mass but based on what we can provide, and not by being the second or third best player in segments that we don’t know because competition is so tough today. Our brand is built up on integrated solutions with customers. Markets will have to reach a critical mass to provide the right service network for.
Also, we’re seeing India develop as a base nott only for sourcing components, but also sub-assemblies and engines for some foreign OEMs to be more competitive in their home markets. Do you see Scania’s Bangalore base playing a similar role?
I see it as a fantastic opportunity to take out different findings, performance steps, component systems, eventually also maybe even full components. This is because of engineering skills, the sub-supply network and we plan to eventually export from the factory.
You mentioned areas like gearboxes and axles where you can work with MAN, though you’ll be competitors in the marketplace. Have you started work on those fronts?
We are undertaking investigations in those areas and have started to work on it. We don’t have any plans for India in that respect for the time being.
Your vision for 2020 mentions 120,000 trucks and 50,000 buses annually. How much of that do you see coming from a market like India?
Before I come to India, let’s take Russia. I think it’s a very interesting market. Or Brazil for instance. We had a pretty low development for many years but when things started to take off, it took off very quickly. The reason actually was the logistics changes that started to happen. When that started to happen, you had a rolling stone that was pretty intense. Several elements have come to place. This includes GST, retail regulation for bigger players, fuel prices. How big will it be in 2020? It is difficult to say. Will it be considered as one of the markets going forward? Yes. Is our investment just heading for 2020? No. Is it heading for the years to come? Yes. Do we see that as a fantastic opportunity of growing? Absolutely. So that means I think it will be very interesting volumes in the 2020 strategy.
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