Eicher, Volvo to form venture

NEW DELHI: Commercial vehicle manufacturer Eicher Motors Ltd (EML) and Swedish truck major AB Volvo have agreed to form a joint venture with an equity value of $768 million.

The two partners have signed a letter of intent to this effect here on Monday and expects the joint venture to start operations by July next year. The Indian partner will hold a 54.4 per cent stake in the joint venture, while Volvo will own the balance.

It will focus mainly on distribution of commercial vehicles in India and overseas markets, where the partners have interest like research and development and manufacturing. Besides, the partners are mulling to get the into financial services business through the joint venture. “The partnership gives us the opportunity to share each other’s strengths. While we can offer our low cost design and engineering capability, sales and service network in India, Volvo can offer Eicher the technology and access to global markets,” Eicher Motor Managing Director and CEO Siddhartha Lal told reporters here.

He said that once the joint venture was formalised, EML’s commercial vehicle business along with related components, design and engineering service businesses would be transferred to the new company that would be a step down subsidiary. EML is making an equity contribution of $418 million.

AB Volvo, which will be investing $350 million into the joint venture, will also pick up a 8.1 per cent stake in EML through purchase from its promoters. 

“Our bus business in India is with a separate partner (Jaico) and this would remain so. Our Bangalore facility will continue to produce Volvo buses and trucks, while Eicher will roll out products from its facility in Pithampur,” AB Volvo Executive Vice-President Jorma Halonen said.