VECV says it is a long-term player, auto slowdown hasn't impacted its capex

The Volvo-Eicher Motors JV plans to invest Rs 650-700 cr on BS VI rollout, apart from a greenfield venture in Bhopal

At a time several commercial vehicle (CV) makers are planning to cut down capex and investments due to slowdown, VE Commercial Vehicles (VECV), a joint venture between Volvo Group and Eicher Motors, plans to invest Rs 650-700 crore on the rollout of BS VI vehicles and a greenfield venture in Bhopal this fiscal. 

Vinod Aggarwal, MD & CEO, VECV, told Business Standard that the current phase of slowdown is temporary, and that the medium and long-term horizons look good. He adds that his firm is preparing for the future, since it is a long-term player. 

The company's Bhopal plant, which will have a capacity of around 40,000 units a year, will start rolling out products from next year. The firm already has one plant at Pithampur with a capacity of around 90,000 units. With the expansion, the total capacity of the company in India would be 1,30,000 units a year.

Apart from meeting domestic demand, these facilities will also cater to the export market, which accounts for 15 per cent of the company's volume today, and in which VECV has been expanding its footprint in recent years. The company hopes to increase the contribution of the export market to it overall volumes as it seeks penetrate more into Africa, South East Asia, and SAARC countries.

In the domestic market, Aggarwal expects some good traction due to pre-buy as customers, especially those who want to replace, will look at buying before prices rise. He expects a BS VI truck to be priced 8-15 per cent more than a BS IV vehicle at the industry level.

Aggarwal claims VECV’s product will have some cost advantage as far as BS VI is concerned since they have already produced and delivered more than 100,000 Euro-VI engines to Volvo globally for more than five years and know the nuances of BS VI technology. 

VECV expects its market share in the M&HCV segment to improve in the BS VI era. 

Speaking about the industry, Aggarwal said factors that led to the slowdown include drop in economy growth and infrastructure spending, which has impaired the movement of major commodities such as steel and cement. Other issues, such as those relating to the credit squeeze brought on by the stress in the NBFC sector, are being addressed by the government. Bank recapitalisation is another initiative in this area. 

The government has also taking steps to improve the economy and sentiment and has started looking at infrastructure spending, Aggarwal said, adding, "With all these factors we see revival will start from September-October of 2020.”