Company is investing Rs 90 cr on assembly line at Bangalore plant.

Volvo Construction Equipment in India (Volvo CE), a wholly-owned subsidiary of Swedish truck and bus major AB Volvo, is setting up a new production facility in Bangalore to manufacture hydraulic excavators and excavator-mounted pipe layer machine. The new assembly line at its existing factory in Bangalore will be operational by the end of 2011, a top company official said.

"We are investing Rs 90 crore to put up an additional assembly line in our Bangalore plant we acquired from Ingersoll-Rand as part of its global acquisition in 2008, Presently, Volvo imports 800 units of hydraulic excavators annually and the new unit would produce around 500 units per annum to begin with and ramp up later," Mrityunjaya Singh, managing director, Volvo India Pvt Ltd said.

Volvo CE’s facility at Pee-nya in Bangalore presently manufactures road machinery to cater primarily to the Indian market and also for some exports.

Hydraulic excavator market in India is estimated at 11,000 units per annum and is expected to grow 30 per cent this year. The potential market for Volvo is 8,000 units per annum and 60 per cent of this comes from the 20-tonne class excavator. So far this machine is imported from Korea. Considering the huge growth in the infrastructure sector, Volvo decided to manufacture this product in India so that it can deliver it faster to the customer, Singh said.

He said, the 20-tonne class excavator has applications in the areas of irrigation canals, real estate, construction and road building. The bigger machines are used in light mining areas where the private sector is getting into sub-contracts from the government. The company will continue to import some machines below the 20-tonne class and above 20-tonne class machines for some more time.

Volve CE has tied up with banks and financial institutions for providing retail financing to its customers on better terms and lower interest rates. Presently, Volvo is studying the possibility of launching its own finance arm. The company has tied up with Srei Finance, HDFC Bank, State Bank of India, Bank of India and in talks with many other banks, Singh said.

For Volvo, excavator forms majority of its construction equipment business in India. For the calendar year 2010, Volvo is expecting a highest ever sales of 2,000 units, a growth of over 30 per cent compared to 2008, when it sold 1,500 units. Of this, excavator sales would be 800 units and another 800 units would be road-making equipment. In 2009, the company witnessed over 20 per cent drop in sales due to general economic downturn.

The growth in sales during the current is expected to come from large infrastructure projects, real estate, mining, road projects and irrigation sectors. The total construction equipment industry in India is likely to touch $3 billion mark in 2010 again, Singh added.

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