Volvo Car’s country head sees huge growth potential for electric luxury cars
Swedish luxury brand Volvo Car feels that the business case for electric luxury cars in India is better than that for internal combustion engine luxury cars. Given the high taxes and import tariffs which have constrained volume growth in the luxury ICE segment, it is betting big on EVs in India.
It expects the EV segment to be a volume driver for the country, a top company official said.
The current high tax structure will continue to hamper volume growth in the luxury ICE car segment which, coupled with the favourable government policies on EVs, is influencing Volvo Car India to invest heavily in EVs, Charles Frump, Managing Director, Volvo Car India, told BusinessLine.
While a luxury ICE car attracts a GST of around 50 per cent, the GST for electric cars is just 5 per cent.
Globally, Volvo Car plans to have half of its car volumes to be fully electric by 2025. “In India, our plan is the same goal or maybe even more,” said Frump. Volvo Car India will be launching its first fully electric car, Volvo XC40 Recharge, in the second half of 2021.
“With the current tax structure, volumes are not going to be significant for any ICE luxury car (company). But, the opportunity is very much there for EVs. As the percentage of EVs grows, I see our opportunity growing a lot,” Frump said.
On the importance of the Indian market for the company, he said: “I would say, at the moment, because the luxury business for Volvo and all luxury car companies is so small — 1 per cent in India of the total cars versus 10-40 per cent of all cars in other markets — to be honest, it hasn’t been a very big market for Volvo. But, we have seen what has happened in Norway. Electric cars have taken off in Norway and that has been huge for us as at Volvo. For Volvo, perhaps, India can be the next Norway.”
Norway’s EV story is famous. As per reports, almost 60 per cent of the new cars sold in the country in September were electric, and this goes up to 89 per cent when hybrids are included. There are far more EVs on Norwegian roads as a proportion of total vehicles than anywhere else in the world, according to a Forbes article dated June 2019.
Norway’s goal is for all new cars sold in the country after 2025 to be electric.
“Luxury cars will lead when it comes to EVs,” said Frump. When asked about further EV launches, he said that there would be more, given that the current government policies on EVs — factors like the lower GST, road tax and import duties — remain in place.
“I always ask the government officials to just keep the policy (the way it is) because the policy is good, (and) because I’ve built my entire forward EV strategy based on the very good policy that India has in line with their vision to be fully electrified,” said Frump.
Since EVs are currently more expensive than ICE cars, luxury car customers are more likely to purchase electric cars, said Frump, adding that the barriers in the adoption of EVs are fewer for luxury customers.
“For example, all my customers own multiple cars. So, if there’s some worry about range anxiety, and they are going to go a really long way, they will take their other car. The majority of luxury customers can afford to have their own charging point at their house and at work. So, for luxury customers, some of the barriers are lower than for non-luxury customers.”
While this has been a “very tough” year for the luxury car business, Frump said that the company is extremely optimistic about 2021 and expects growth also to happen then. Safety is also going to be one of the primary focus areas for the company, he added.