Volvo to invest $900m in joint venture with Chinese truck maker Dongfeng

Swedish truck maker AB Volvo (STO:VOLV-B) said it would pay CNY5.6bn (USD900m/EUR669m) for 45% in a new venture with Chinese peer Dongfeng Motor Group Company Ltd (HKG:0489), or DFG, in a move that would convert Volvo into the largest global heavy-duty trucks maker.

The venture called Dongfeng Commercial Vehicles (DFCV) will comprise most of DFG’s medium- and heavy-duty commercial vehicles operations, the buyer said. The deal, part of a strategic alliance between the two groups, will enhance Volvo and DFG’s positions, while ensuring great opportunities for both of them.

Volvo will contribute technological expertise and global presence, providing a significant potential to DFCV to expand and make profits outside China.
In turn, the Swedish group will become co-owner of China’s largest heavy-duty and medium-duty truck manufacturer, securing economies scales in terms of sourcing, development and production for its truck business, it said.

Completion is anticipated to take place in 12 months, pending clearance from Chinese regulators, among other conditions.

On a pro-forma basis, DFCV had net revenues of some CNY39bn and an operating profit of around CNY1.2bn, from the sale of about 142,000 heavy-duty trucks and 49,000 medium-duty trucks in 2011. It has some 28,000 employees.