The commercial vehicle segment has been an integral part of the economy. This segment has seen consistent growth over years and is now set to receive a shot in the arm. Eicher Motors Ltd (EML) and AB Volvo (Volvo) have entered into a definitive agreement to form a joint venture (JV) which will be effective from 1st July, 2008.
Volvo Group Executive Management member and Volvo Trucks Asia Chairman Par Ostberg said that Asia is a crucial market and India being a key nation cannot be discounted, hence the JV with Eicher which will enable Volvo to capitalize on the Indian firm’s strengths. Eicher’s low manufacturing operation cost and widespread presence will be a boon to Volvo. There will be a new product range of heavy duty trucks which will be launched later.
The joint venture company was being spoken about since December and EML and Volvo have signed a Letter of Intent to build this coalition. The new company is proposed to be named VE Commercial Vehicles Ltd.
Interestingly, when asked about the venture into very light/small commercial trucks (like Tata 407), Siddhartha Lal, MD & CEO, EML said that this segment is not in direct sight of the company but can be looked at in future. The light truck segment has shown good growth but the focus will be on the heavy duty trucks. Small truck segment is a 5,000Cr market while the heavy truck segment stands at 26,000Cr.
Ironically, the cost of transporting a tonne of cargo per kilometer in India is more than that of the western market. Bad roads, underpowered trucks, lack of safety and comfort and frequent breakdowns all lead to inefficient transportation of goods.
