In a bid to expand its presence in overseas markets, Eicher Motors Ltd (EML) has entered into a joint venture with Sweden?s AB Volvo to sell its commercial vehicles in global markets through the latter?s vast dealer network.
Separately, Volvo will also acquire 8.1% stake in EML from its promoters along with the technology about development of low-cost products as well as Eicher?s over 150 dealers across the country via this newly formed joint venture company.
While Eicher Motors? will hold 54.4% stake in the JV company at an investment of $418 million, Volvo will pump in $350 million to acquire the remaining 45.6%, taking the total equity value of the JV company to $768 million. Eicher will invest another $88 million as a portion of debt into the new company that will not only focus on development and distribution of high commercial vehicles in the country.
It will also take care of the entire commercial vehicle business as well as the components and engineering design services business of Eicher Motors and the financial services being offered by Volvo in global markets.
However, the company?s Royal Enfield division, which constitutes a mere 10-12% to its total revenues, will continue to be a part of EML. ?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 (LoI) with Volvo. Volvo, which commands a strong market share in the bus segment in Indian 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 joint venture we plan to increase sourcing components from company?s Pithampur plant for Volvo products,? Jorma Halonen, deputy CEO, AB Volvo, said.
While, Volvo and EML will continue manufacturing their products at their respective plants in Bangalore and Pithampur, the new products that will emerge from the Eicher stable and may have Volvo technology will come up at EML?s Pithampur plant and will be sold under the Eicher brand only.