Volvo CE is now an internal division of Volvo Peru, adopting a unique business strategy for Latin America as it gears up for a new boom in Peru.
Peru is finding its groove again. Lauded as an ‘economic miracle’ and ‘Latin tiger’ during a decade-long mining boom, the Andean country struggled to maintain momentum in recent years as prices for key metal exports dipped. But things are looking up again: growth accelerated above expectations in 2015, the mining sector is back on track, and a new government is pledging massive infrastructure works over the next five years.
All of this is good news for Volvo Construction Equipment’s plans to expand rapidly in one of Latin America’s brightest economic prospects.
“We have an optimistic view at the moment,” says Enrique Ramírez, Business Director of the Volvo CE division in Peru. He notes that the market for construction equipment – like the economy – is heavily influenced by trends in the mining sector. Business slowed when the commodity boom ended around 2012, but the election of a pro-business government in July is set to reignite the market.
“Even though it is still early to see concrete actions from the new government, the way it is presenting its plans and objectives makes us confident that there are interesting times ahead,” Ramírez continues.
Ramírez, a 45-year-old executive with more than a decade of experience with Volvo in Latin America, was recently appointed to spearhead a radical shift in Volvo CE’s business model. Since March, the distribution and post-sale support of Volvo CE machines in Peru has been managed by Volvo Peru rather than the third-party dealers typically used throughout the region.
“We found a situation whereby Volvo Trucks in Peru has a very strong brand image and is a leading player in heavy construction and mining,” explains Ramírez. “We decided that the best way to serve the Peruvian market was to incorporate the Volvo CE business as an internal division of Volvo Peru.”
The move has enabled the company to take advantage of the group’s established business operations in Peru – including cross-border financing and the ability to trade-in second-hand Volvo machines – as it builds up a specialized and dedicated team for the Volvo CE unit. But Ramírez says the benefits go beyond internal synergies: “Volvo Peru’s positive image in sectors that are also natural markets for construction equipment helps us increase visibility and grab the attention of key clients.”
For now, the most sought-after Volvo machines in Peru are the L120F and L150H series wheel loaders, used in mining projects and increasingly in agri-business developments. Ramírez says the EC300 and EC380 excavators are also popular among those who use them, but acknowledges the challenge of making these models a core part of the business. The company is also looking to expand sales of other equipment like compactors and pipelayers, and has just started importing skid steer loaders and compact excavators with an eye to capturing part of a market currently dominated by backhoe loaders.
All of this activity is laying the groundwork for what promises to be an exciting era for Peru and a window of opportunity for Volvo CE. Construction is due to start soon on a flurry of new mining projects, while President Pedro Pablo Kuczynski has outlined an ambitious plan to upgrade the country’s dilapidated infrastructure, including major works in transport, health and energy.
“As in many Latin American countries, Peru still has a large infrastructure gap,” says Ramírez. “There are many areas that can be developed, and the government is going to drive this, so we want to be prepared to serve our clients’ needs.”
A crucial part of the plan is developing the kind of world-class post-sales support that Volvo has earned a reputation for around the world. This includes good availability of replacement parts and the speedy resolution of problems in a country where reliable equipment is needed in hostile and remote areas, be it the high-altitude slopes of the Andes or the impenetrable Amazon jungle.
Faced with these unusual geographical challenges, Ramírez says his unit is developing customized maintenance plans for clients. “When we go to sell a machine, the service department is there with us – we can explain the benefits of the equipment and offer a range of services to ensure it has a high-level mechanical availability.” As is standard procedure, the delivery of a new piece of equipment comes with a dedicated training program so that operators can maximize the technological and efficiency benefits of a Volvo CE machine.
Although still a small player in the Peruvian market, Ramírez is confident the new business model will elevate Volvo CE’s brand and expand the company’s market share to over 10% within five years. “The changes we are implementing will turn us into a more competitive brand. We’re in an initial phase of creating an image of Volvo CE in Peru as a concrete and trustworthy option for our clients.”