The Hindu Business Line : Volvo forms joint venture with Eicher

Better access to markets: Mr Jorma Halonen (right), Executive Vice-President, ABVolvo and Deputy CEO, Volvo Group, and Mr Siddartha Lal, CEO and MD, Eicher MotorsLtd, at a press conference in the Capital on Monday. -- Kamal Narang

Our Bureau

New Delhi, Dec. 10

Domestic commercial vehicles manufacturer Eicher Motors Limited (EML) on Monday signed a Letter of Intent to form a separate joint venture for its commercial vehicles and components business with Swedish automotive giant AB Volvo.

Volvo will invest $350 million in the venture, of which $275 million will be paid in cash and the remaining from its domestic truck dealer and service network worth $75 million. EML will have 54.4 per cent equity in the step-down subsidiary, while Volvo will hold 45.6 per cent, with the enterprise value clocking $506 million.

Buying stake in EML

Meanwhile, Volvo will also acquire an 8.1 per cent stake in EML from its promoters. When asked the details of investment that Volvo will incur to buy stake in EML, Mr Siddhartha Lal, CEO and Managing Director, EML, said, “ 8.1 per cent stake by Volvo is a separate transaction that is still being worked out.”

Mr Jorma Halonen, Executive Vice-President & Deputy CEO, AB Volvo, said, “Both Volvo and Eicher brands will continue to co-exist. Our manufacturing units remain out of the agreement.” However, he said that the venture would be for sharing distribution network and technology know-how. Mr Halonen said the company’s existing partnership with Jaico for buses would remain unaffected. Volvo that currently has 10 dealers will get access to 150 dealers for its trucks. Similarly, Eicher which is looking to expand its footprint globally, will be able to leverage on Volvo’s network across 180 countries.

Mr Halonen said that Volvo would continue to manufacture its buses and trucks at its Bangalore facility and Eicher at its Pithampur facility. And since both brands would be in different segments, they would not be competing against each other.

Apart from commercial vehicles, Eicher will also merge its auto component business with the new subsidiary.