Volvo to invest $270 Mn in Indian venture

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New Delhi: Leading global automobile manufacturer Volvo and India's Eicher Motors Limited (EML) Monday said they will set up a new joint venture for commercial vehicles in India, with the Swedish company investing 10.82 billion ($270 million).

"The joint venture now comprises Eicher Motors' entire truck and bus operations and the Volvo Group's Indian truck sales and service operations," the two firms announced at a press conference here.

The joint venture company, which integrates the commercial vehicles business in India, will be called VE Commercial Vehicles. The venture will have exclusive distribution rights in India for all of Volvo's present and future trucks.

"According to the agreement, the entire commercial vehicle business of EML would be transferred to the joint venture company, in which Eicher Motors would hold a 54.4 percent equity," Siddhartha Lal, managing director of Eicher, said.

Royal Enfield, which manufactures the iconic Bullet motorbikes, will, however, remain outside the scope of the fresh agreement and function under the aegis of Eicher, officials added.

"Volvo will bring in capital to the tune of 10.82 billion and also transfer its Indian truck distribution and service network to the new company. Volvo will hold 45.6 percent stake in the company," said Volvo's Par Ostberg.

Ostberg, who is senior vice president and chairman of the company's trucks operations in Asia, will head the board of the new company.

"India is investing heavily in improving its infrastructure and together with Eicher, we have highly favourable conditions to further strengthen our position on the Indian market," he added.

"The board will have equal representation from both companies - three nominees each," Lal said. "We will work towards shaping the commercial vehicle industry in India and developing markets."

Volvo has also picked up 8.1 percent equity in Eicher from the promoters.

"Taking into account its direct and indirect holding, Volvo's effective ownership in the joint venture will be 50 percent." Ostberg added.
Source: IANS
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