Focus Dongfeng

Strategic alliance with Chinese company Dongfeng Motor Group


In January of 2013, AB Volvo 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. At completion of the transaction, the Volvo Group will become the world’s largest manufacturer of heavy-duty trucks.

- 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.

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 within a year
Completion of the transaction is subject to certain conditions, including the approval of relevant anti-trust agencies and Chinese authorities. The purchase consideration amounts to RMB 5.6 billion. The ambition is to complete the transaction as soon as possible and completion is expected to take place within approximately 12 months from signing. Payment of the purchase price will increase Volvo’s net debt by approximately SEK 6 billion.

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.

Volvo Group to become world’s largest heavy-duty truck manufacturer

The world’s largest truck market
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 the Volvo Group, 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.