New Delhi, July 28, 2008: The Cabinet Committee on Economic Affairs has given its consent to AB Volvo to own 45.6 per cent stake in the joint venture with Eicher Motors Ltd to produce commercial vehicles and components.

“The cash investment by Volvo together with its subsidiaries or affiliates will amount to $275 million,” the Information and Broadcasting Minister, Mr Priyaranjan Dasmunsi, said after the Cabinet meeting.

Volvo will hold 50 per cent stake in the joint venture — Volvo Eicher Commercial Vehicles Ltd — through a combination of direct and indirect holdings, with Eicher Motors taking the rest.

Apart from its direct stake in the proposed company, Volvo will hold 4.4 per cent through the indirect route. It is picking up 8.1 per cent stake in Eicher Motors, which has a 54.4 per cent stake in the joint venture.

According to the agreement, the Swedish automotive giant would transfer its distribution and service network in the country to Eicher, and the latter along with its promoters has inked a non-compete agreement with Volvo. With this agreement, except for Royal Enfield, a majority of its business would be transferred to the joint venture company — the step-down subsidiary of Eicher Motors Ltd.

The deal, however, does not see any amalgamation of brands or manufacturing facilities between the two companies.

With the joint venture, Volvo, which already has a presence in the domestic market through its manufacturing facility in Bangalore, will be able to strengthen its distribution network to 150 from the current 10 dealers. Similarly, the domestic commercial major, Eicher would be able to expand its footprint globally using Volvo’s network across 180 countries.