Ashok Leyland, the flagship of the Hinduja Group has entered into a 50:50 joint venture with the US-based John Deere, the world's largest manufacturer of construction and engineering equipment maker.

This two companies will make and market construction equipment and the joint venture expects to commence production by early 2010 with an initial roll out of backhoes and four-wheel-drive loaders.

R Sashasayee, managing director, Ashok Leyland said "With this JV, we realise our foray into a new and adjacent vertical as part of Ashok Leyland's diversification plans. We see huge synergies between this business and our existing one of commercial vehicles in terms of aggregates, parts and distribution network. We are happy that in John Deere, we have a technology leader with an impressive portfolio of proven and popular products' to partner us in this venture.

John Deere, founded in 1837, manufactures construction and forestry products at a number of factories around the world and is distributed through a network of more than 600 dealer locations worldwide. It makes crawler dozers, crawler loaders, skid steers, backhoe loaders, forestry track feller bunchers and harvesters, knuckleboom loaders, winches and components for various heavy equipment products. The company acquired Timberjack in December 1999 that enabled it to increase the division's product line to more than 100 models.

Samuel R. Allen, president, worldwide construction and forestry division, John Deere, said, "In Ashok Leyland, we have found an ideal partner with a shared vision. This action enhances John Deere's growth of the construction equipment business outside of North America. India is an important market and Ashok Leyland is a knowledgeable partner with strengths in brand recognition, quality manufacturing, distribution and loyal dealerships.''

The range of products manufactured through this JV will subsequently be expanded to include a full line of construction equipment and the products will be exported to both Ashok Leyland and John Deere markets. The JV will build a manufacturing facility in India and is currently evaluating site locations.

The venture will bring together Ashok Leyland's famialirity of the Indian heavy commercial vehicle sector, and its distribution network strength and John Deere's technical know-how and vast experience in the business of construction equipment.

Construction equipment is used in numerous types of earthmoving, including road building, underground utilities, site development and residential construction, and in material handling, road repair and maintenance and mining sector.

In the first quarter this year Deere & Company's net sales of the worldwide equipment operations increased by 18 per cent. The equipment net sales in the United States and Canada were up 6 per cent for the quarter. Net sales outside the United States and Canada increased by 38 per cent for the quarter.

Deere & Company recorded a worldwide net income of $575.2 million for the third quarter ended July 31, compared with $537.2 million for the same period last year. For the first nine months, net income was $1.708 billion as compared with $1.400 billion last year.

A sharp decline in housing market in the US for construction and forestry equipment is expected to remain under continued pressure and is expected to touch a 60-year low in 2008. The negative impact of the US housing sector is likely to affect Deere's forestry equipment markets in the US and Canada, though its sales outside the two countries is expected to rise in 2008.

In India, currently backhoe loader is the most popular equipment and account for almost 60 to 70 per cent of total demand, selling about 20,000 units a year. In the next five years the sales are projected to touch around 30-35,000 units. However, with big infrastructure projects taking place in the country like malls, SEZ etc, the need for larger equipment like larger wheeled loaders, large excavators and crawler dozers will be in demand over the years.

Ashok Leyland is the flagship of the Hinduja Group and a leading manufacturer of commercial vehicles in India with a turnover of more than $2 billion for the year 2007-08. The company has six manufacturing locations and has an annual production capacity of 84,000 vehicles with additional 100,000-vehicle capacity planned by 2010.

The company has associate companies in the Czech Republic and the UAE and joint ventures in Sri Lanka and Bangladesh, besides exports to over 20 countries wordwide.

In May this year, Ashok Leyland Ltd signed three separate joint venture agreements with Nissan Motor Co of Japan for development, manufacture and sale of light commercial vehicles and power trains. (See: Ashok Leyland, Nissan in JV pacts for LCVs, power trains and technology)