Volvo, world’s second-largest truck maker, on Monday, said it planned to invest $350 million to expand in the fast-growing Indian market through a joint venture with Eicher Motors.

Volvo will contribute $350 million, including $275 million in cash, to gain a 45.6 per cent direct stake in the partnership, the company said in a statement. It also plans to buy 8.1 per cent of Eicher, giving Volvo 50 per cent of the venture.

Eicher’s commercial vehicle and components business will be transferred to the venture at an enterprise value of $506 million, and the two will combine their service and dealer networks for trucks in India.

The partnership will improve Volvo’s access to the Indian market, where New Delhi-based Eicher controls more than a quarter of sales of trucks weighing less than 12 tons. MAN AG, Nissan Motor Co and Navistar International Corp have formed joint ventures in India, increasing competition for local truckmakers.

The Volvo joint venture will have about 2,300 employees and will concentrate production at Eicher’s current plant in Pithampur in central India, the company said, adding that, the agreement, expected to be completed before the middle of next year, would have only a marginal impact on its results in the short term.

Growth opportunities

“What you really have to look at is the combination of buying into one of the world’s quickest growing and largest markets,” Volvo CEO Leif Johansson told a news conference in Stockholm.

“We came to the conclusion that the price is well justified given the growth opportunities and looking at the alternative costs and options that were there from our point of view,” he added. “With Volvo’s strong brand recognition and financial strength and its support in products, technology and distribution we will be well positioned to further develop our brand and product offering in India,” Eicher Motors’ Chief Executive Officer and Managing Director Siddhartha Lal said.

Eicher, which makes trucks in the 5-25 tonne range at its central Indian plant, has said it would launch at least three heavy trucks by March.

Eicher is raising its annual truck capacity to more than 48,000 units from 38,000 currently.