Eicher forms joint venture with Swedish firm Volvo

Domestic firm Eicher Motors (EML) on Monday entered into a joint venture (JV) with world’s number-two truck maker A B Volvo. This mutually-beneficial partnership will help EML expand its presence overseas and sell commercial vehicles in global markets through the Swedish company’s vast dealer network. It will also give Volvo access to EML’s vast network of over 150 dealers across the country. Volvo will further raise its stake in EML by acquiring an additional 8.1 per cent stake from its promoters.

While EML will hold 54.4 per cent stake in the JV company at an investment of $418 million, Volvo will pump in $350 million to acquire the remaining 45.6 per cent. The total equity value of the JV company amounts to $768 million. Eicher will invest another $88 million as a portion of debt into the new company. However, the Royal Enfield division, which constitutes 10-12 per cent to EML’s total revenues, will continue to remain its part.

The JV company will focus on development and distribution of high commercial vehicles in the country and also take care of the commercial vehicle business, components and engineering design services business of Eicher Motors and the financial services being offered by Volvo in global markets. “The association will help us use Volvo technology to improve our product portfolio and its huge dealer network to expand operations in the developing markets like Africa, Middle-East and other parts of Asia,” Siddhartha Lal, CMD, Eicher Motors, said at the signing of letter of intent with Volvo.

Volvo, which commands a strong market share in the bus segment, plans to increase its percentage share of sourcing components from India. “With high level of technology, India has emerged as an important source of auto components and through this JV we plan to increase sourcing components,” Jorma Halonen, deputy CEO, AB Volvo, said.