The Volvo Group has completed the purchase of 45 per cent of the Chinese truck manufacturer, Dongfeng Commercial Vehicles. Spending just below $1 billion, Volvo’s agreement with Dongfeng Motor Group Company sees the Swedish truck manufacturer become a 45 per cent stakeholder in the Chinese automotive company’s subsidiary, Dongfeng Commercial Vehicles (DFCV).
The DFCV handles production of heavy-duty and medium-duty commercial vehicles. The process leading up to this deal has been protracted as both sides had a number of conditions to be met. This is Volvo’s second attempt to get itself into the Chinese truck market and gain access to Chinese manufacturing capability. The previous deal fell through with a certain amount of acrimony several years ago.
“This strategic alliance is a real milestone and entails a fundamental change in the Volvo Group’s opportunities in the Chinese truck market, which is the largest in the world,” said Olof Persson, Volvo President and CEO. “At the same time, it will provide us with the opportunity to become involved in growing DFCVs international business in a manner that will benefit us and our Chinese partner.”
In 2013, the Chinese truck market was said to amount to 774,000 heavy-duty trucks, with a further 286,000 medium-duty trucks sold. Of this market DFCV claims, what it calls, a leading position with sales of 120,600 heavy-duty trucks and 51,000 medium-duty trucks, giving it market share of 15.6 and 17.8 per cent, respectively.
The structure of a joint venture company between Volvo and Dongfeng is expected to be unveiled later this month. On January 26 an inauguration ceremony has been announced to be held in Shiyan, China to mark the conclusion of the transaction. We can expect more details of the deal to become available at that point.