Dongfeng Volvo Alliance to Jointly Produce Medium and Heavy Trucks

After the failure of the alliance with China National Heavy Duty Truck, the world's second-largest truck manufacturer Sweden Volvo Group plans to make a comeback. The reporter learned yesterday that Dongfeng Motor will sign a joint venture agreement with Volvo Group in Beijing on January 26. The two parties will jointly establish a joint venture company for commercial vehicles to produce and sell medium and heavy trucks.

The reporter learned that the address of Dongfeng Volvo Truck Joint Venture Company was located in Shiyan, Hubei, and Shiyan was the birthplace of Dongfeng Commercial Vehicle. In addition to the traditional four major process blocks for assembly, welding, painting and stamping, an engine plant will be built at the manufacturing site. Dongfeng Motor declined to disclose the amount of the joint venture, but said that the joint venture was different from the previous 50:50 peer-to-peer ratio. Dongfeng Motor and the Volvo Group had a 55:55 equity ratio and Dongfeng Motor was a controlling shareholder. According to the agreement, Volvo truck output technology and standards, Dongfeng commercial vehicle is responsible for providing manufacturing capabilities.

When a joint venture company was established with Nissan Motor in 2003, Dongfeng Motor injected a series of assets such as Dongfeng Commercial Vehicle, Dongfeng (a production light commercial vehicle) and Dongfeng Parts into the Dongfeng Nissan JV. Therefore, the joint venture with Volvo Trucks involved the restructuring of Dongfeng Motor Co., Ltd. (Dongfeng and Nissan JV, hereinafter referred to as “Dongfeng Limited”).

Previously, the industry had speculated that Dongfeng will be split, leaving only the passenger car segment. Yesterday a senior Dongfeng Motor told reporters that the company’s final plan was to repurchase Dongfeng Commercial Vehicle Co., Ltd. from Dongfeng. The assets, including parts and components, light commercial vehicles, etc., were still affiliated with Dongfeng Motor. This means that Dongfeng Limited, as the dominant position of Dongfeng and Nissan’s joint venture, remains unwavering.

“The strength of the Renault-Nissan alliance is passenger vehicles instead of commercial vehicles. It has stripped out commercial vehicles from Dongfeng, and established new joint ventures with the stronger Volvo Group, in line with Dongfeng’s requirements for improving all aspects of capabilities.” Dongfeng Motor insiders said.

On Dongfeng’s internal schedule, Dongfeng Motors plans to enter into a joint venture agreement with Renault Automotive in March, after which it will sign a reorganization agreement with Fujian Fuqi Group. If we count the joint venture between the passenger car transmission company established in October 2012 with the German company Getrag Group and the German semi-trailer company in November 2012, Dongfeng’s recent foreign expansion and reorganization will reach five cases.

Xu Ping, chairman of Dongfeng Motor, stated that the competitive environment is undergoing drastic changes. Although medium- and long-term company development is expected to continue to share the steady growth of the market, it faces unprecedented challenges and challenges. "To promote joint venture development and expand cooperation , is an important support for stronger and better."

The data shows that in 2012 China's auto sales were 19.3064 million units, an increase of 4.33% year-on-year. Passenger vehicles maintained a slight increase. However, in the commercial vehicle sector, sales of heavy trucks, medium trucks, and light trucks all showed negative growth. Dongfeng Motor Company sold 3.087 million vehicles in 2012, ranking second in the industry. Among them, sales of passenger cars were 2.455 million, and sales of commercial vehicles declined slightly to 623,000.

At the 2013 working meeting held on January 16, Zhu Fushou, general manager of Dongfeng Motor, stated that he will "further utilize global resources, actively participate in various forms of mergers and acquisitions, and seek opportunities for strategic cooperation, mergers and acquisitions and restructuring on a global scale. Launch technology acquisitions, platform mergers and acquisitions, and brand mergers and acquisitions to gather first-rate foreign companies for superior resources and branding.”

Seeking shelter in the Chinese market is equally important for the Volvo Group. In fact, the Volvo Group entered China as early as 10 years ago, but the result of "marriage" ended in "losing the city of Mai." In June 2003, China National Heavy Duty Truck Group and Volvo Group invested 1.6 billion yuan to form Jinan Huawo Truck Co., Ltd.. In 2005, it only produced more than 200 vehicles. In early 2006, Huawo Truck Company completely suspended production. In 2009, Sinotruk and Volvo Group announced the termination of cooperation.

Affected by the European debt crisis, Volvo Group's operating profit in the third quarter of 2012 fell sharply to 2.9 billion Swedish kronor, down 50% year-on-year. The two major rivals of the German Mann and Daimler Group have already established joint venture companies in China. Analysts pointed out that it is particularly important for the Volvo Group to use the Chinese market to cushion the downward pressure on other global markets.

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