Eicher Motors along with Sweden's Volvo announced on Friday that they are going to invest Rs. 2.9 billion for raising their production capacities.

The money will be infused into the Pithampur plant in Madhya Pradesh. The unit currently has a huge line of engineers which is going to be used for producing 85,000 engines per year after this investment. It now produces 40,000 engines every year.

Eicher makes VE commercial vehicles. The plans are also that the unit would be used as the global manufacturing hub for Volvo.

It is expected that the raised capacity will be effective from the second half of 2012. The JV Company also said that the units thus produced will first be used for sufficing the domestic demands and then sent for exports.

By 2012, Euro III and IV norms will also be applied on the products and after that as many as 30,000 base engines will be sent to Volvo's plant in France. They would then be assembled with Euro V and VI engines of the European automaker.

Talking to the media, group Chairman, Volvo VE Commercial, Par Ostberg said that Indian market is important in terms of volume and profitability.