Volvo make major move in India

The Volvo Group has signed a final agreement with the Indian vehicle manufacturer Eicher Motors covering establishment of a new Indian joint-venture company.

The joint venture, with the proposed name VE Commercial Vehicles. comprises Eicher Motors’ entire truck and bus operations and the Volvo Group’s Indian truck sales operations and service network for trucks and buses.

In accordance with the agreement, Eicher Motors transfers its entire truck and bus operations and its components business as well as operations within technical consulting services to VE Commercial Vehicles. Eicher Motors’ production of motorcycles will not be included.

Volvo will have direct ownership of 45.6% of the joint-venture company. Volvo is also acquiring 8.1% of Eicher Motors Limited from the majority owner and consequently gains a direct and indirect ownership interest of 50% in VE Commercial Vehicles.

The Volvo Group will pay a total of $320 million for the 50% direct and indirect ownership of the joint-venture company. $263 million is provided the joint venture in cash and the remaining $58 million comprises a $38 million payment for the 8.1% in Eicher Motors Limited and $19 million in consideration for a competition clause in which Eicher Motors Limited and its majority owner undertake not to compete with the joint-venture company or its operations. In addition, Volvo is transferring its Indian truck dealer network and its Indian truck and bus service network to the joint-venture company.

“This agreement provides a very solid platform for further growth on the Indian market for heavy trucks, which is the fourth largest in the world,” says Pär Östberg, member of the Volvo Group Executive Management and responsible for the Group’s Asian truck operations.

“India is investing heavily in improving its infrastructure and together with Eicher we have highly favorable conditions to further strengthen our position on the Indian market.”