Volvo to make Eicher products in S Africa and Indonesia

Swedish commercial vehicle (CV) maker Volvo is looking at assembling Eicher-branded CVs at its factories in South Africa and Indonesia to boost volumes. The company has an equal venture in India with Gurgaon-based Eicher Motors, VE Commercial Vehicles (VECV), and has inducted the Indian automobile brand into its global portfolio to increase reach in emerging markets.

Philippe Divry, senior vice-president, Volvo, said: “Synergies in distribution between Volvo and Eicher are extremely important as customers who buy trucks not only look for good products but also a strong service network. Besides leveraging Volvo’s network for Eicher trucks, we are also reviewing opportunities to assemble these products at Volvo’s manufacturing facilities. A final decision will be taken after detailed evaluation on case-to-case basis.”

As the fifth brand in Volvo’s portfolio, the Indian partner will use the Swedish manufacturer’s distribution network to sell Eicher-branded vehicles in South Africa, West Asia and Southeast Asia.

VECV could also assemble the new Eicher Pro trucks at Volvo’s plants in South Africa and Indonesia for launch in these countries, where demand is estimated at 100,000 and 30,000 vehicles a year, respectively. Volvo already sells CVs under the Volvo, Renault Trucks, UD Trucks and Mack brands globally. The company, however, does not have a fuel-efficient mass-market global brand to tap developing markets. “In the Volvo Group, brand structure is a strict matter. Every brand has a well-defined positioning and is pitted against clearly identified competitor brands. We have inducted the Eicher brand to respond to customers looking for Indian and Chinese products in emerging economies. We will enter these markets with affordable, cost-efficient products equipped with world-class technology from the Eicher Pro range,” said Divry.

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 2013, VECV exported 3,100 trucks and buses, which constituted about eight per cent 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 few years, we expect exports to contribute around 15 per cent to our overall volumes," informed Vinod Aggarwal, CEO of VECV.

The Volvo Group and Eicher Motors had additionally 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 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 countries in Asia such as Thailand and China." VECV has already exported 2,500 engines in 2013.

The unit has the capacity to manufacture 25,000 engines in the first phase that can be scaled up to 100,000 units by 2015. The Euro VI-compliant diesel base engines is being 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 an aspirational growth target of achieving sales of 100,000 units of trucks and buses by 2015.