Volvo Eicher Commercial Vehicle (VECV), which is in the advanced stages of setting up of a new plant for its trucks and bus business to meet the rising demand, may have to raise its capex.
Though the company plans to spend around Rs 500-odd crore as a part of this year’s capex, setting up of a new plant may require an additional investment of around Rs 300 crore over a period of two years.
Speaking on the sidelines of the launch of two new models in Pro 6000 series trucks in Mumbai on Wednesday, Vinod Aggarwal, MD and CEO of VECV, said that the approval from Board for the new plant is awaited.
According to Aggarwal, the commercial vehicle (CV) sector is seeing a revival of demand on the back of increased government funding in infrastructure, enhancement in mining activities, among other reasons. Further, the replacement cycle of the vehicles which were sold about five to six years ago may start happening as the shelf life of a vehicle is around five years.
According to the company executives, the existing plants are running at their full capacity and the growing demand necessitates investing in a new plant. The industry players expect the overall growth in demand to be in double-digits during the current financial year.
As per a report by Icra, the CV segment is seeing a strong revival due to increased spending on infrastructure by the government, replacement demand, smoothing of issues relating to goods and services tax, stricter implementation of overloading norms in many of the North Indian states including in UP, Rajasthan, among others.
