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Volvo Group to acquires 45% of Dongfeng Commercial Vehicles for $900M; Volvo to become world’s largest manufacturer of heavy-duty trucks

China is the world’s largest truck market. Click to enlarge.

AB Volvo has signed an agreement with the Chinese vehicle manufacturer Dongfeng Motor Group Company Limited (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 commercial vehicles business.

Completion of the transaction will make the Volvo Group the world’s largest manufacturer of heavy-duty trucks with a combined annual volume (2011) of 326,000 HD trucks and 98,000 MD trucks.

The purchase price is RMB 5.6 billion (US$900 million); completion is expected to take place within approximately 12 months.

Volvo’s transaction with DFG follows an agreement between DFG and Nissan Motors, in which DFG purchased the medium- and heavy-duty commercial vehicle operation from the joint venture DFL (owned jointly by DFG and Nissan Motors). The major part of the re-purchased commercial vehicle operation will be included in the new company, Dongfeng Commercial Vehicles (DFCV).

(Established in June 2003, DFL is a joint venture between Nissan and DFG which offers a full line-up of passenger vehicles and light-, medium- and heavy-duty commercial vehicles for sale in China. DFL had decided to spin-off its commercial vehicle section and concentrate its management resources on development of its passenger and light commercial vehicle businesses.)

Payment of the purchase price will increase Volvo’s net debt by approximately SEK 6 billion (US$929 million).

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. 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.

—Volvo’s President and CEO Olof Persson

In 2011, DFCV reported net sales of approximately RMB 39 billion (pro forma) and operating income of approximately RMB 1.2 billion (pro forma). DFCV has approximately 28,000 employees and sold 142,000 heavy-duty trucks and 49,000 medium-duty trucks in 2011 (pro forma).

“China is the world’s largest truck market with a total market for heavy trucks equivalent to the European and North American markets combined.”
—Olof Persson

For the first three quarters of 2012, DFCV’s net sales amounted to approximately RMB 22 billion (US$3.5 billion) (pro forma) and operating income to approximately RMB 0.3 billion (US$48 million) (pro forma). During the same period, 81,000 heavy-duty trucks and 35,000 medium-duty trucks were sold by DFCV (pro forma). At the end of the third quarter of 2012, DFCV had net financial debt of approximately RMB 500 million (US$80 million) (pro forma). The AB Volvo holding in DFCV is expected to be reported as an associated company and consolidated in accordance with the equity method, one-line consolidation, within the Trucks segment.

During 2012, the Chinese market for heavy-duty trucks totaled approximately 636,000 vehicles, while the corresponding figure for the medium-duty market was 290,000 vehicles. 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% and 15.7%, respectively.

The partnership with DFG not only provides the Volvo Group 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.

The DFCV management team will consist of eight members, with Volvo nominating four of the eight members and Dongfeng the remaining four. Dongfeng will nominate the company’s Managing Director, while Volvo will be responsible for nominating the Chief Financial Officer. The Board of DFCV will comprise seven board members and it has been agreed that the Volvo Group will account for three places and DFG four.

The transaction is subject to certain conditions, including approval of relevant authorities. The ambition is to complete the transaction as soon as possible.



Perhaps a third of all that's moved on Volvo wheels.

The chart for China trucks is HUGE.


I never realized that the China truck market was so large. On of the major things that China could probably do to address their pollution problem is to have cleaner burning diesel engines. This might also make a big dent in black carbon based global warming. Of course, they could also have cleaner burning coal power plants and maybe even shift away from coal.

They could even move some of their freight from truck to rail. For all the press they get for high speed passenger rail, their freight rail system must be lacking or they would not have such a large truck market relative to their GDP.


A very smart move by Volvo Trucks and China's environment with cleaner trucks. This JV will give Volvo Trucks a much wider market and also give access to much lower cost truck parts and assembly facilities.

A similar JV with one of India's major truck-bus manufacturer would be another good move? Will it come soon?

Richard C Burton

I wonder if we should assume that because Volvo is going to own the Chinese truck subsidiary that their diesel engines will be cleaner. In my experience visiting Costa Rica, Toyota sells very dirty burning diesel pickups that unfortunately run forever...and to my knowledge Toyota has done zip to rectify those spewing engines that they so sold for so long!


If may be fair to believe that many of the future high quality cleaner Volvo Trucks will be built in China, for the local and export markets.

If that happens, many of the future trucks sold in China may be cleaner, specially if other manufacturers do the same as Volvo.

They may not have a choice because all trucks sold in China will soon have to have much lower emissions. Similar JVs may multiply?

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