Truck maker Volvo has reached a tentative deal with Indian company Eicher Motors to set up a joint venture that will combine the pair’s truck and bus businesses in India.
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The Associated Press (AP) said the two companies had signed a letter of intent that requires Volvo to invest $US275m (EUR188m) in the joint venture and transfer its existing truck dealer and service network – valued at $75m – to the new company.
In turn, Eicher Motors will transfer its entire truck and bus operations, including its manufacturing plant in northern India, to the joint venture, the report added.
According to AP, Eicher Motors, which has close to 10% of the Indian market, makes mostly small and medium-sized trucks, but has lately put more emphasis on heavy trucks amid expected demand in that category.
“Major investments in improved infrastructure and stricter rules for truck weights will strongly drive demand for heavy trucks (in India), which makes the market particularly attractive for the Volvo Group,” Volvo’s chief executive Leif Johansson was quoted as saying.
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By GlobalData“Eicher is an ideal partner for Volvo on the Indian market,” he said.
Eicher CEO Siddhartha Lal told AP the joint venture would benefit from Volvo’s strong brand recognition and support in products, technology and finances.
The two companies would work on a final agreement, which would be subject to approval by regulators and shareholders of Eicher Motors, and the transaction is expected to be completed before mid-2008, the Associated Press said.
Volvo will directly own a 45.6% stake in the joint venture company and acquire an 8.1% stake in Eicher Motors and the joint venture will have about 2,300 employees, the report added.
