Volvo said that its JV with Dongfeng in China will help the company surpass Daimler and become the world’s largest manufacturer of heavy trucks.
Volvo agreed to pay $900 million to buy a 45% stake in the joint venture with Dongfeng, giving the Swedish company the possibility to expand in China where it has only a small presence. The newly created venture will be called Dongfeng Commercial Vehicles after Dongfeng buys Nissan out from their JV in medium and heavy-duty trucks.
China was “a little bit of a missing link in our global strategy for Volvo trucks”, Volvo CEO Olof Persson said. “With this agreement … we get a major foothold and share in the world’s largest truck market.”
Dongfeng, which is the world’s second-largest manufacturer of heavy-duty trucks, sold 186,000 trucks in 2011, when Volvo sold 180,000 vehicles and Daimler 436,000 vehicles in China. Now that the global slowdown affects sales in Europe and US markets, truck manufacturers are beginning to focus on the emerging markets to boost profitability and growth.
Last year 636,000 heavy-duty trucks have been sold in China and 290,000 medium-sized vehicles. Volvo expects truck sales in North America and Europe to be flat this year at about 250,000 and 230,000 units respectively.