Volvo will become the world’s joint-largest heavy truck manufacturer next year, having agreed a part ownership deal of Chinese vehicle manufacturer Dongfeng Motor Group’s (DFG) medium and heavy truck business.
Currently the third largest heavy-duty vehicle manufacturer globally with total unit sales in 2011 of 180,000, Volvo Group will take a 45% share of a new subsidiary of DFG called Dongfeng Commercial Vehicles (DFCV) for a fee of £569m.
The new company will incorporate the majority of Dongfeng’s truck operations, which in 2011 saw the Chinese firm rank second behind Daimler in global heavy truck production. Roughly 142,000 of DFG’s 186,000 heavy truck sales were produced by the part of the company that will now become DFCV.
Continuing trend
The agreement is the second such arrangement with a global manufacturing partner for DFG, with it having recently purchased the remaining stake in a medium- and heavy-duty commercial vehicle joint venture operated with Nissan Motors, which will be incorporated into DFCV.
The Chinese market for heavy trucks in 2012 amounted to 636,000 vehicles, of which the newly created DFCV would have held a 16.1% market share of. The move by Volvo Group is seen as an attempt to establish itself in the rapidly expanding Asian market.
"We are pursuing a clear strategy to achieve our vision of becoming the world leader in sustainable transport solutions," said Volvo president Olof Persson.
"This is a very exciting venture that will combine the best of two worlds, strengthening the positions of the Volvo Group and Dongfeng. Combining Dongfeng’s strong domestic position and know-how with the Volvo Group’s technological expertise and global presence will offer DFCV excellent potential for growth and profitability in and outside China. With this agreement in place, we take a crucial step toward reaching a number of our key strategic objectives such as size and growth in Asia," said Persson
Both parties expect the deal to be concluded within the next 12 months, subject to approval by governmental and anti-trust bodies.
Once the deal is completed Volvo and Dongfeng expect to cooperate on product platforms, engines and powertrains whilst leveraging their greater purchasing powers.
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