Volvo investing more in India

09 October 1999

Swedish truck maker AB Volvo is planning to invest additional funds in its India operations. The company will bring in $22 million as equity in Volvo India Pvt Ltd, its wholly-owned Indian subsidiary, which has a plant at Hoskote near Bangalore. The company has the Foreign Investments Promotion Board's approval to invest $60 to 80 million in the Indian subsidiary.

The latest tranche of investment is proposed to be brought in through preference shares priced at Rs 90 per share. These will be converted into equity shares at a later date.

Volvo's product range in India comprises the 49-tonne, heavy duty FH12 multi-axle haul-up truck, which was introduced in August 1998, and the FL7, a two-axle truck, meant as a carrier of sea containers and bulk tanks. In about two years, the Indian company has been able to achieve an indigenisation level of nearly 50 per cent.

At the international level, Volvo has just announced its plans to set up a joint venture with Japan's fourth largest automotive company, Mitsubishi Motor Company. Combined with Volvo's own strength and the strength it is acquiring from the impending takeover of Swedish rival Scania, the new venture will be the world's largest truck and bus manufacturing facility. In 1998, the combined sales of these three companies was 253,000 vehicles, which is well ahead of the current leader, DaimlerChrysler, which sold 220,000 trucks.

The joint venture plan is for Mitsubishi to hive off its truck and bus manufacturing operations into a separate unit and for Volvo to pick up a 19.9 per cent stake in the unit. To strengthen its ties with the Japanese companies, Volvo will take a five per cent stake in Mitsubishi Corporation, which will be reciprocated by the Japanese company by acquiring a one per cent stake in Volvo.

The joint venture will augur well for India. It could lead to the launch of Mitsubishi's light commercial vehicles and light buses in India. Volvo officials in India have been quoted as saying that the company will use the joint venture to access this range of products and introduce them in India.