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November 18, 2009

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Home » Business » Auto

End of road for Volvo venture

THE Volvo Group is to end its partnership with China National Heavy Duty Truck Group Corp by quitting their joint venture.

The world's leading truck maker has agreed to sell its 50-percent equity interest in Jinan Huawo Truck Corp to the Chinese partner and its subsidiary Sinotruk Ltd.

The joint venture had failed to be the success both parties had expected.

The end of the cooperation with Sinotruk marks the latest setback for Volvo in China where other global truck makers speeded up expansion on expectation of higher demand in the long term amid economic growth.

Founded in 2003, Jinan Huawo Truck used to be the nation's leading commercial vehicle maker. But production has been suspended since 2006 after higher product prices led to a slump in sales.

Disputes arose as Sinotruk claimed Volvo was using the venture only as an assembly plant while the Swedish car maker accused Sinotruk of stealing its technologies.

"Volvo needs to find new partner if it still eyes China as a promising market," said Yao Hongguang, an auto analyst from United Securities Co.

"But Volvo should learn the lessons to deepen localization in the future cooperation and make its vehicles more price competitive," he added.

The equity sale is still subject to government approval, Volvo said.

Jinan-headquartered Sinotruk is the biggest producer of heavy duty trucks in China with about 20 percent market share.

It sold 112,000 vehicles last year and reported a sales revenue of 26 billion yuan (US$3.8 billion).

In July this year, German truck maker MAN SE formed a strategic partnership with Sinotruk through the purchase of a 25 percent stake in the state-owned truck maker.

The tie-up enabled Sinotruk to produce a series of new heavy duty trucks after MAN agreed to license its engine, chassis, axle and other technologies.

Daimler AG also formed a 6.35 billion yuan venture with China's Beiqi Foton Motor Co in January for making middle and heavy duty trucks.


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