Sweden’s Volvo Group is merging its bus business in India with VE Commercial Vehicles (VECV), a subsidiary of Eicher Motors, in a move that will help the later strengthen its presence in buses, with a portfolio that will straddle across segments, right from small school buses to premium inter-city coaches. The acquisition is being done at a cash consideration of Rs 100.5 crore.
VECV is a joint venture between Volvo Group and Eicher Motors, operational since 2008. The business includes the complete range of Eicher branded trucks and buses, VE Powertrain, Eicher’s components business as well as sales and distribution of Volvo trucks in India.
Now, definitive agreements have been signed, which will cover manufacture, assembly, distribution and sale of Volvo buses in India. Consequently, Volvo’s bus manufacturing facility at Hoskote near Bengaluru and the over 500 employees of Volvo Bus India will be transferred to VECV.
“VECV’s strong presence in the Indian bus market with Eicher branded buses will be complemented by Volvo Buses’ prominent position in the premium bus segment,” said Vinod Aggarwal, managing director and CEO of VECV.
The acquisition is expected to be completed in 1-2 months from the date of execution of the business transfer agreement.
Following the completion of the transaction, the bus business of VECV and Volvo will be consolidated into a newly formed bus division within VECV. This new division will offer Volvo and Eicher branded buses with an aim to maximise synergies to capitalise on market opportunities.
“With this integration, VECV will be able to leverage synergies in the areas of product development, purchasing and manufacturing with access to Volvo Group’s world class technology in buses,” said Aggarwal.
The strategy will also be extended to exports, where the new bus division will offer products and services that are complementary with the core product portfolio of Volvo Buses in select international markets.
Over 7,000 Volvo buses operate on Indian roads and it's been a market leader in the premium inter-city bus market in the country. Around 1,800 Volvo city buses also operate in 35 cities.
Volvo officials clarified that this deal did not mean that Volvo planned to exit India. Rather, the company sees it as an opportunity to build upon the success of the VECV JV.
“By consolidating the operations of Volvo Buses India into VECV, we aim to further develop our bus business and strengthen our position in the Indian bus market. The new bus division will offer a full range of modern buses covering customer needs for heavy, medium and light duty buses,” said Hakan Agnevall, president of Volvo Bus Corp.
Akash Passey, senior vice-president of Volvo Bus Corp will head the newly formed VECV bus division as President and report to Aggarwal.
For the year ending March 2020, Volvo’s standalone bus business in India reported a turnover of Rs 276.80 crore, down 34 per cent from the Rs 421.68 crore revenue, in the previous financial year.
VECV is the third largest commercial vehicle maker in India after Tata Motors and Ashok Leyland.
The deal comes at a time the travel and transportation businesses have been impacted hard due to the spread of COVID-19 pandemic. With coronavirus cases continuing to rise, and very few people expected to travel due to fears of catching the virus and social distancing in place, the near-term looks tough.
Eichers’ school business has also been impacted as schools remain shut and classes are now being conducted online.
However, officials see these as near-term challenges and expect strong growth opportunities over the long term.