Case written by Shivram Apte as part of instruction material developed for teaching at a class in Business Schools. Case facts and decisions are not intended to be a demonstrator of correct or incorrect handling of management situations. They are for discussion only. Volvo – the Swedish Automobile manufacturer has launched luxury buses in India. The move has surprised analysts who are wondering about the salability of a 45 lakh Rupee bus. The bus is built on the B7R platform. Equipped with an inter-cooled turbocharged engine capable of developing close to 300-brake horsepower, it is easily the fastest and the most powerful bus on Indian roads. Analysts have been skeptical of the ability of a bus costing 45 Lakh rupees to compete with 15 Lakh rupee products from the Indian stables. Apart from the financials, the Volvo appears to be more suited for the Autobahns rather than Indian roads. However, after the National Highways Authority of India upgrade the "Golden Quadrilateral" connecting the four metros to a four-lane system by end of 2003, the average speed for intercity travel is expected to increase substantially. More importantly, the standard deviation on travel times between two cities is expected to drop significantly. It is on this system of National highways that Volvo is banking on. Further, Volvo has stated that speed and power are not the primary advantages that the bus offers. It is reliability that they are selling. The service interval for the Volvo is 60,000 km as against 10,000 km for other Indian buses. Even though fuel economy at lower speeds is 3 kmpl against 4 kmpl for Indian competitors, it remains constant as speeds cross the 80 km/h mark all the way up to 128 km/h. Competing buses start to consume fuel rapidly above 80 km/h and deliver only 2.8 kmpl above 100km/h. Another advantage is the far higher level of comfort that the Volvo offers not only its passengers but also its drivers – with power steering and air-conditioning...
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