Ashok Leyland and Nissan Motor have signed an agreement forming three joint venture companies to make light commercial vehicles.
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This first stage of the partnership will include cooperative development, manufacture and distribution of LCVs under both the Ashok Leyland and Nissan brands.
Nissan President and CEO Carlos Ghosn said: “Our LCV business and overall expansion into India represents two of the biggest growth opportunities for Nissan in the medium and long term. Following previous announcements relating to expanding our passenger car business in India, this latest investment will broaden our coverage of this market in addition to providing new LCV products for emerging markets.”
The deal is still subject to final government and statutory approvals from both sides, the two automakers said in a statement.
The three joint venture companies are:
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By GlobalData- Vehicle Manufacturing Company – with exclusive rights to manufacture LCV products in India for both partners. Manufacturing facilities will be located in India and the company will be majority owned by Ashok Leyland. In the medium term, production volume (for Indian and export markets) is expected to be above 100,000 units annually.
- Powertrain Manufacturing Company – responsible for the manufacture and assembly of engines and other drivetrain components for the LCV models and for export. Manufacturing will be located in India and the company will be majority owned by Nissan Motor Company.
- Technology Development Company – responsible for the development of LCVs and related powertrains, destined for the Indian and emerging markets. This JV company will be owned 50:50 by the two partners. The products developed will be sold under both the Ashok Leyland and Nissan brands.
The two partners said they also are eyeing cooperation in sales and distribution, including providing access for Nissan to Ashok Leyland’s dealer network in India and for Ashok Leyland to use Nissan dealer networks in some export markets outside India.
R Seshasayee, managing director of Ashok Leyland said: “Ashok Leyland has been consolidating its growth in medium and heavy commercial vehicles while exploring suitable opportunities to expand the total product portfolio. This partnership with Nissan, renowned for their product engineering and a wide range of LCV products, will allow [us] to expand into the fast growing LCV segments in India.”
Both companies will now carry out detailed feasibility study covering all proposed areas of cooperation, leading to the signing of a memorandum of understanding and subsequent formation of the legal partnership. This study is expected to be complete by next October.
Hinduja Group is an investment and banking group with holdings across the manufacturing services and banking sectors. Ashok Leyland is its flagship company and a leading manufacturer of commercial vehicles in India with 06-07 sales turnover of about $US2bn.
It has six manufacturing locations at Chennai, Hosur (three plants), Alwar and Bhandara and annual production capacity of 84,000 vehicles which will be boosted to 100,000 this year.
Ashok also has associate companies in the Czech Republic and the UAE and joint ventures in Sri Lanka and Bangladesh. It exports to over 20 countries.
A local Associated Press report noted that Tata Motors dominates the Indian commercial vehicle segment overall. Analysts told the news agency Ashok Leyland has a 30% market share of the medium and heavy vehicle segments but only 2% of the light commercial vehicle market because of a lack of competitive products.
“This is the most significant of the recent developments for Ashok Leyland,” Merrill Lynch analyst S Arun was reported to have said in a research note, adding that it would “eventually plug the gap of the company’s absence in the light vehicles segment.”
