Volvo signs letter of intent with Indian vehicle manufacturer Eicher

Volvo signs letter of intent with Indian vehicle manufacturer Eicher

The Volvo Group has signed a letter of intent with the Indian vehicle
manufacturer Eicher Motors Limited regarding the establishment of a new Indian
joint-venture company. According to the letter of intent, the joint-venture
company will hold Eicher Motors Limited's entire truck and bus operations and
the Volvo Group's Indian sales operations within trucks.

“The Indian market for heavy trucks is the fourth largest in the world and it is
strategically highly important for the Volvo Group to have a presence and to
offer Indian customers products that are specially adapted to their market and
needs,” says Volvo CEO Leif Johansson.

The total Indian market for trucks exceeding five tons amounted in FY 2006/2007
(ending March 31st) to 300,000. Eicher Motors Limited produced 24,300 trucks
last year, of which most (20,300) were light and medium-heavy in the range of
5-12 tons and 4,000 in the segment >16 ton. The company also produced 3,800
buses. Eicher Motors Limited is India's third-largest producer of trucks, with a
market share in light and medium-heavy trucks of 27 %. The company has recently
entered the growing heavy vehicle segment  (>16 ton) in India and is already
also the third largest player in the heavy segment. Eicher Motors Limited has
launched many new products in the 16-, 25-, 31- and 40-ton segments that are
adapted to the Indian market. The company also produces and sells buses,
motorcycles and components, mainly for gearboxes and axles. In addition,
engineering services are offered. 

“Already today, India is one of the world's largest truck markets and
projections indicate continued very strong growth,” says Volvo CEO Leif
Johansson. “Major investments in improved infrastructure and stricter rules for
truck weights will strongly drive demand for heavy trucks, which makes the
market particularly attractive for the Volvo Group.”

According to the letter of intent, Eicher Motors Limited is to transfer its
entire truck and bus operations as well as the component business and
engineering services to the newly formed joint-venture company. Motorcycle
production will not be included.

For its part, the Volvo Group will provide USD 350 M to the joint-venture
company through transferring its Indian truck dealer and service network to the
company, valued at USD 75 M, and contributing USD 275 M in cash.

The cash contribution means that the joint-venture company gains highly
favorable financial resources to be able to initiate an aggressive focus on the
heavy segment.

As a result of the transaction, Volvo receives a direct ownership in the
joint-venture company of 45.6%. Since Volvo also intends to acquire 8.1% of
Eicher Motors Limited from the majority owner, Volvo gains an ownership
interest, directly and indirectly, of 50% of the joint-venture company.

The joint-venture company will have its production mainly concentrated to Eicher
Motor Limited's current plant in Pithampur in central India. The joint-venture
company will have about 2,300 employees and the operations within the
joint-venture company that come from Eicher Motors Limited had sales in 2006 of
about SEK 3.0 bn and operating income of SEK 128 M. The operating margin for the
period was 4.2%.The parties' intent is to immediately combine and establish a
joint service and dealer network for trucks in India, while initiating joint
projects within product development and purchasing.

“Eicher is an ideal partner for Volvo on the Indian market,” says Volvo Deputy
CEO Jorma Halonen, who is responsible for the Group's expansion in Asia. “It is
a well-managed company, with solid management personnel and highly valuable
knowledge about the demands and needs of the Indian market as well as a
promising focus within heavy trucks. Combined with the Volvo Group's financial
strength and expertise within the heavy truck segment, this provides the
joint-venture company extremely favorable conditions to improve an already
strong position in the medium-heavy segment and at the same time to become a
leading player in the growing heavy segment on the Indian market.”

”This is a win-win deal,” says Eicher Motors Limited's CEO Siddhartha Lal. ”We
are looking forward to working with Volvo and to become a member of the largest
global commercial vehicle alliance in the world. With Volvo's strong brand
recognition and support in products, technology and financial strength, we will
be well positioned to further develop our brand and offer in India.”

The parties will now initiate negotiations regarding a final agreement.
Implementation of the transaction requires the approval of the affected
government authorities and the shareholders in Eicher Motors Limited. The
transaction is expected to be completed before mid-year 2008.

Short term, the transaction should only have a marginal effect on Volvo's
profitability, net financial position and earnings per share.

December 10, 2007

For more information, please contact:
Media Relations: Mårten Wikforss, +46 31 66 11 27 alt +46 705 59 11 49		
Investor Relations: Christer Johansson, +46 31 66 13 34 alt +46 706 54 55 22

Note on press and telephone conference:
There will be a combined press and telephone conference hosted by Volvo in
Stockholm today at 10.00 AM CET. Volvo will be represented by Leif Johansson
Volvo CEO and President. Jorma Halonen, Deputy CEO and Siddhartha Lal, CEO of
Eicher Motors Limited, will participate by telephone. 
Time: 10.00 AM CET.
Place: Spårvagnshallarna Konferens, Birger Jarlsgatan 57 A, Stockholm

The press conference will be webcast via Internet on www.volvo.com and it will
also be possible to participate and ask questions via telephone. To download the
presentation, please go to www.volvo.com under “investors.” For those who wish
to participate in the press conference by telephone, please call +46 (0)8 506
269 30  (Sweden) or +44 (0)207 108 63 03 (UK) 5-10 minutes prior to the start. 

Visit http://www.thenewsmarket.com/volvogroup to access broadcast-standard video
from Volvo Group. You can preview and request video, and choose to receive as a
MPEG2 file or by Beta SP tape. Registration and video is free to the media.

AB Volvo (publ) may be required to disclose the information provided herein
pursuant to the Securities Markets Act. The information was submitted for
publication at 7.30 a m 12-10-2007.



The Volvo Group is one of the world's leading manufacturers of trucks, buses and
construction equipment, drive systems for marine and industrial applications,
aerospace components and services. The Group also provides complete solutions
for financing and service. The Volvo Group, which employs about 100,000 people,
has production facilities in 19 countries and sells their products in more than
180 markets. Annual sales of the Volvo Group amount to about 27 billion euro.
The Volvo Group is a publicly-held company headquartered in Göteborg, Sweden.
Volvo shares are listed on the Stockholm stock exchange and on NASDAQ in the US.