Volvo-Eicher to put Rs288 crore into new engine plant

Volvo-Eicher Commercial Vehicles Ltd (VECV), the joint-venture company between Sweden's Volvo Group and Eicher Motors Ltd (EML), announced on Friday an investment of Rs288 crore for a new engine plant at its existing facility at Pithampur, Madhya Pradesh.

This will make India a global manufacturing hub for Volvo's new medium-duty engine platform, with the only other factory for the engine type being in Japan. After its full integration into the Swedish automaker's global supply chain, VECV would possibly be the largest commercial vehicle engine manufacturer in the country.

Starting 2013, the joint venture company would manufacture most of the engines for the European and Asian markets (except Japan). These will be used for Volvo's trucks and buses, besides Eicher's heavy duty commercial vehicle range.

Siddhartha Lal, managing director and chief executive officer, VECV, said that the new plant would add 85,000 units capacity a year to the existing 40,000 units for engines at the Pithampur facility. Out of the total, 30,000 base engines would be earmarked for the European market, while the rest would be for domestic consumption for both Eicher and Volvo branded products sold in India.

''These highly sophisticated engines will be built at the new purpose-built plant. It will be way ahead in terms of performance and reliability over the existing competition. The investment will be financed internally through VECV's cash reserves and will be over the Rs500-crore investments announced earlier for capacity and channel expansion,'' Lal said.

Par Ostberg, president, trucks asia, Volvo Group and chairman of VECV, said that with demand for heavy trucks expected to rise in India, this move will enable the Swedish automaker to be closer to its target growth market of Asia. Other benefits of shifting manufacturing to the country include higher economies of scale and the lower cost of manufacturing.