Volvo to induct Eicher as 5th global brand

The company is looking at developing India as a hub for medium duty engines

 

Volvo AB, which is set to surpass Daimler to become the world’s largest maker of heavy trucks after acquiring stake in Dongfeng Commercial Vehicles (DFCV), is looking at inducting ‘Eicher’ as a fifth brand in its global portfolio to increase penetration in emerging markets across the world.

As the fifth brand in the Volvo portolio, Eicher products would be retailed at Volvo dealerships in specified markets globally. In the first phase, the Indian joint-venture company VE Commercial Vehicles (VECV) would leverage Volvo’s distribution network to sell Eicher-branded vehicles in markets in South Africa, West Asia and Southeast Asia. VECV is a 50-50 joint venture between the Volvo Group (Volvo) and Eicher Motors Limited (EML).

At present, Volvo sells commercial vehicles under the Volvo, Renault Trucks, UD Trucks and Mack brands in the international market. The company, however, does not have a fuel efficient mass market global brand to tap into developing markets currently. With Europe and North America projected to post flat growth in the current year at 230,000 and 250,000 units respectively, globally CV makers are increasingly muscling in in emerging markets to boost sales in a slowing economy.

Vinod Aggarwal, chief executive officer, VECV, said, “The Eicher brand is known for its value and fuel efficiency. We are upgrading our entire product range in collaboration with Volvo. These vehicles will be introduced by the end of this year and would be exported to markets in South Africa and Southeast Asia leveraging Volvo’s distribution network over the next two years”.

At present, VECV sells commercial vehicles mostly to markets in Bangladesh, Nepal and Sri Lanka using the company’s distributors (not Volvo’s dealers). In 2012, VECV exported 2,501 trucks and buses which constituted around four percent of overall sales. “The ratio of exports in our total sales can go up. We need to develop more and more country specific products to make inroads into other markets.

Over the next 4-5 years we expect, exports to contribute 12-15% to our overall volumes”, added Aggarwal. The potential for growing international business is considerable for VECV, given that the market size in Indonesia and South Africa are estimated to be around 125,000 units and 40,000 units respectively.

The Volvo Group and Eicher Motors is additionally investing to set up an engine manufacturing facility in Pithampura, Madhya Pradesh. The engine facility will be a global hub for meeting the medium-duty automotive engine requirements of Volvo globally. Aggarwal informed, “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 countries in Asia such as Thailand and China.”

The unit will go on stream in July 2013 and will have the capacity to manufacture 25,000 engines in the first phase that can be scaled upto 100,000 units by 2015. The Euro VI-compliant diesel base engines will be supplied to Volvo Europe and the same platform will be adapted to Euro III and IV engine technologies to meet the VECV requirements and other Volvo group requirements for this type of engines in Asia.

VECV has invested Rs 1300 crore in India since the formation of the JV in 2008. The company has plans to infuse another Rs 1200 crore till 2015 to meet the requirement of ongoing projects in setting up the engine manufacturing unit, the bus body building facility, in developing new products and in expanding capacity expansion by 45% to 8000 units per month by 2015.

VECV recorded a marginal decline of 0.4% to sell 48,831 units last year. VECV has an aspirational growth target of achieving sales of 100,000 units of trucks and buses by 2015.