Volvo Eicher Powertrain (VEPT), a division of Volvo Eicher Commercial Vehicles (VECV) is constructing an engine plant with 100,000 units per annum capacity at an investment of Rs 600 crore. The plant is expected to go on stream late this year, or early next year, and is being constructed at Pithampur near Indore. Pithampur is also the venue for the manufacture of VE trucks, and was built when Eicher began assembly of light commercial vehicles in collaboration with Mitsubishi of Japan in the early 80s. Both the facilities at Pithampur, the engine as well as the truck plant seem set to play a significant role in Volvo’s global strategy.
Apart from sourcing components for its facilities the world over, Volvo is expected to source engines for its European and some other Asian locations from Pithampur. Vinod Aggarwal, CEO of VECV, is known to have recently said during his interaction with the media that they are currently exploring the opportunities of supplying driveline components like transmission gears, shafts and axle parts to Volvo’s global requirements from India. Eicher has auto component manufacturing plants at Thane near Mumbai and Devas near Indore. They are a part of Eicher Engineering Components (EEC), the automotive component division of VECV. The Thane unit supplies transmission components to VECV and tier suppliers like Spicer India.
Having entered the Indian market in 1998 with its range of heavy duty trucks like the FH and FM, Volvo has come to offer a fairly wide range of trucks and buses built at Hoskote near Bangalore, outside of its joint venture, VECV, with Eicher, which started approximately three years ago. Volvo entered into a joint venture with Eicher with either partner holding a 50% stake.
Successfully sourcing components like aluminium and ferrous castings, forgings, fasteners, and precision machined parts through a purchasing set-up in India, the association with Eicher has only added to Volvo’s ability to further increase its sourcing ability in India. It is therefore not surprising if VE will soon become the fifth global brand of Volvo Group. Apart from the engine plant, which once operational, is expected to supply Volvo’s location in Europe and Asia with Euro 6 compliant five- and eight-litre (four- and six-cylinder) engines, the truck plant at Pithampur in a year and a half could be rolling out Volvo Asia truck range. Powered by the same family of engines (albeit in Euro 3 and Euro 4 configuration) the engine plant will supply to Europe, and probably China, the Asia truck range will include medium and heavy duty trucks based on the UD Truck platform.
This development, claim industry sources, comes on the back of Eicher’s ability to work closely with its suppliers, and the good relations it has built with them over the years. Such good are the relations between the two, arriving from a corporate culture a Eicher that is encouraging of new, positive developments, that vendors are willing to go out of their way to support the company’s cause. Industry sources point out instances when Eicher executives worked closely with vendors to help them increase their efficiency, bring down costs and improve quality.
Working for Eicher, or VECV to be precise, it is not surprising that suppliers are keen to be a part of the new developments. Especially when Eicher has an increasingly bigger role to play in Volvo’s global strategy. Eicher’s greater participation, backed by its ability to keep costs down, and drive the development cycle faster, is the quality that has surprised the Volvo executives, claim industry sources. The team at Eicher has shown that they can do a better job of controlling costs and driving development in India than they had envisaged, they add.
As far as the Asia Truck range goes, a select group of suppliers in India are known to have been shown the prototypes recently. The trucks, claim industry sources, would have a good deal in common with the trucks that Volvo is working upon for the Chinese market. In China, the Swedish company acquired 45% stake in a new established subsidiary of Dongfeng, named Dongfeng Commercial Vehicles (DFCV), for 5.8 billion Swedish kronor (US$ 898m) recently. A move that has made it the largest truck manufacturer in the world! Looking at further extending co-operation with Dongfeng after increasing the stake, manufacture of modern trucks based on UD Truck platforms could well be a logical extension under the Asia Truck program. UD Trucks is a Japan-based subsidiary of Volvo AB, and was acquired from Nissan in 2007. Prior to the acquisition, it was called as Nissan Diesel. The name, UD Trucks was adopted in 2010, and comprises a range of trucks marketed under the name of Atlas, Condor, Big Thumb, and Quon. These trucks are said to compete with the Daimler owned Fuso range of commercial vehicles in the home market of Japan.
Apart from Japan, UD Trucks are also known to have a presence in South East Asia, a few markets in South America, and Australia. The arrival of Asia truck range in India based on the UD Trucks platforms could signal the heating up of competition. Especially with the presence of Daimler in India, with trucks based on the Axor and Fuso platforms. Especially when Daimler, through its India-centric brand, BharatBenz, has stressed on a local content of as high as 85%.
The UD platform based Asia trucks from VECV, backed by Eicher’s ability to work closely with its suppliers, is likely to fuel competition in the market for modern commercial vehicles. A chunk of the commercial vehicle market, which Tata Motors and Ashok Leyland is keeping a close eye on. Commercial vehicle market leader in India, Tata Motors is known to be working on a range of new platforms below the Prima range, and above the light commercial vehicle range.
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