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Volvo to become world's largest HGV maker after buying into Chinese firm

Ref:A00066
Published: 28 January 2013


VOLVO will become the world's largest manufacturer of heavy-duty trucks, after signing an agreement to acquire 45 per cent of the Chinese-based Dongfeng Commercial Vehicles (DFCV) for £569m, who manufacture medium and heavy HGVs.

"This is a very exciting venture that will combine the best of two worlds, strengthening the positions of the Volvo Group and Dongfeng and offering excellent opportunities to both parties," says Volvo's President and CEO Olof Persson.

Volvo Dong Feng
"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."

Completion of the transaction is subject to certain conditions, including the approval of relevant anti-trust agencies and Chinese authorities. The ambition is to complete the transaction as soon as possible and completion is expected to take place within approximately 12 months from today.

The Volvo Group is 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.

"We are pursuing a clear strategy to achieve our vision of becoming the world leader in sustainable transport solutions," says Olof Persson. "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."

The China-based manufacturer has approximately 28,000 employees and sold 142,000 heavy-duty trucks and 49,000 medium-duty trucks in 2011.

For the first three quarters of 2012, 81,000 heavy-duty trucks and 35,000 medium-duty trucks were sold by the far-eastern company.

DFCV occupied a leading position in China in both the heavy- and medium-duty segments, with sales of 102,000 heavy-duty trucks and 45,500 medium-duty trucks, corresponding to market shares of 16.1 per cent and 15.7 per cent, respectively.

"China is the world's largest truck market with a total market for heavy trucks equivalent to the European and North American markets combined," says Olof Persson. "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."

According to Volvo, the partnership with DFG not only provides them with ownership in the largest heavy-duty and medium-duty truck manufacturer in China, but also offers excellent opportunities to achieve economies of scale in terms of sourcing, development and production for the Group's truck operations.

There are a number of areas in which cooperation is planned between DFCV and Volvo, such as engines and powertrain components, product platforms and purchasing.

"In Dongfeng, we have a partner that we know well, having worked together for several years, and with a management team and a product range that we really appreciate," says Olof Persson, Volvo President and CEO. "Joining forces will provide clear benefits for both parties and the right conditions to develop DFCV into a competitive and successful international truck manufacturer with healthy profitability."

"This partnership will enable us to significantly strengthen the Group's position, both in and outside China," says Olof Persson. "With DFG as a partner, we can improve our position in the increasingly important Chinese market and become more internationally competitive by virtue of the Chinese volumes."

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