Eicher may become part of Volvo AB’s global portfolio

Volvo AB, set to surpass Daimler to become the world’s largest maker of heavy trucks after acquiring a stake in Dongfeng Commercial Vehicles, is looking to add Eicher as the fifth brand in its global portfolio. The move could be aimed at increasing penetration in emerging markets.
As part of Volvo’s global portfolio, Eicher products would be sold at Volvo dealerships in specific markets. In the first phase, VE Commercial Vehicles (VECV), the 50-50 Indian joint venture of the Volvo Group, and Eicher Motors Limited (EML), would leverage Volvo’s distribution network to sell Eicher-branded vehicles in markets across South Africa, West Asia and Southeast Asia.
In the international market, Volvo currently sells commercial vehicles under the names Volvo, Renault Trucks, UD Trucks and Mack. The company, however, does not have a fuel-efficient mass-market global brand to tap into developing markets. With Europe and North America projected to post near-flat growth this year, at 230,000 and 250,000 units respectively, commercial vehicle makers globally are increasingly banking on emerging markets to boost sales.
VECV Chief Executive Officer Vinod Aggarwal says, “The Eicher brand is known for value and fuel efficiency. We are upgrading our entire product range in collaboration with Volvo.”
VECV sells commercial vehicles mostly in Bangladesh, Nepal and Sri Lanka, using its own, not Volvo’s, distributors. Last year, VECV exported 2,501 trucks and buses, which accounted for around 4% of its overall sales. “The ratio of exports in our total sales can go up. We need to develop more country-specific products to make inroads into other markets. Over the next four to five years, we expect exports to contribute 12-15 % to our overall volumes,” Aggarwal said.
VECV’s potential to grow international business is considerable, given the markets in Indonesia and South Africa are estimated at about 125,000 and 40,000 units, respectively.
Additionally, the Volvo group and EML are investing to set up an engine manufacturing facility in Pithampur, Madhya Pradesh. The facility would be a global hub for Volvo’s medium-duty automotive engines.
Aggarwal said, “We are preparing to supply around 30,000 engines from India to meet European requirements. Besides, engines from the Indian facility will also be supplied to Asian countries such as Thailand and China.”
The unit, to go on stream in July 2013, would have the capacity to manufacture 25,000 engines in the first phase. This could be scaled up to 100,000 units by 2015.
The Euro-VI-compliant diesel base engines would be supplied to Volvo Europe and the same platform would be adapted to Euro III and IV engine technologies to meet the requirements of VECV and the Volvo group for Asian markets.
Since the joint venture was formed in 2008, VECV has invested 1,300 crore (US$234 million) in India. By 2015, the company plans to infuse another 1,200 crore (US$216 million) in setting up the engine manufacturing unit and a bus body-building facility.
(April 2, 2013)