dongfeng-volvo

Volvo is set to be the world’s largest heavy-duty truck maker after it signed an agreement with China’s Dongfeng Motor Group (DFG) to acquire 45% of a new subsidiary of DFG, Dongfeng Commercial Vehicles (DFCV), which will include the major part of DFG’s medium- and heavy-duty truck business.

“This is a very exciting venture that will combine the best of two worlds, strengthening the positions of Volvo and Dongfeng and offering excellent opportunities to both parties,” Volvo’s president and CEO Olof Persson said. “Combining Dongfeng’s strong domestic position and know-how with Volvo’s technological expertise and global presence will offer DFCV excellent potential for growth and profitability in and outside China.”

Completion of the transaction is subject to conditions, including the approval of relevant anti-trust agencies and Chinese authorities. The purchase consideration amounts to 5.6 billion yuan (RM2.78 bil), and follows a recent agreement between DFG and Nissan, in which the former bought out Nissan in a heavy-duty commercial vehicle JV.

Volvo-FH-Series-Truck

Volvo is currently the world’s third largest manufacturer of heavy-duty trucks with 180,000 units sold in 2011. Dongfeng was the second largest producer of heavy-duty trucks in 2011, with total sales of 186,000 units, of which approximately 142,000 units were produced by the part of the company that will be included in DFCV.

“China is the world’s largest truck market with a total market for heavy trucks equivalent to the European and North American markets combined. The partnership between the Volvo Group and DFG will strengthen DFCV’s already strong position in China and provide the company with the right conditions for successful international expansion,” Persson added.