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Volvo muscles in Chinese truck industry
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“Riding the east wind” is an ancient Chinese saying about seizing the momentum of natural forces to make further inroads.
It also might sum up Swedish truck maker Volvo Group’s investment in Dongfeng Group (DFG), China’s biggest player in the world’s largest truck market. Dongfeng literally translates as “east wind.”
The deal, after 9 years of negotiations, was finalized last month when Volvo Group bought 45 percent of a subsidiary of DFG, Dongfeng Commercial Vehicles (DFCV) for 5.5 billion yuan (US$885 million). Details of how the joint venture, which includes the major part of DFG’s medium- and heavy-duty commercial vehicles business, will operate have not been disclosed yet.
The deal comes as China’s heavy-duty vehicle market shows signs of flattening. Does that mean the new joint venture is an “ill wind that blows nobody any good?”
“We could have started earlier,” admitted Claes Svedberg, senior vice president of Volvo Group responsible for China’s truck joint ventures. “But from a technology point of view, it is not too late.”
As China seeks to improve the efficiency of its transportation and reduce emissions, the joint venture presumably will tap into Volvo Group’s advanced technologies for heavy-duty vehicles, whose sales volume in China already surpasses the combined ones in the US and Europe.
Svedberg said the focus of the joint venture will be on local production, instead of imported Volvo trucks. DFCV offers scales of economy in the domestic market.
Volvo Group has licensed the joint venture to produce a heavy-duty manual transmission in Shenyang, a component it plans to buy back later to ease the costs of shipping the parts from Sweden.
And for Dongfeng-branded trucks, the alliance with Volvo Group may be “riding on the west wind” to explore the overseas market.
“We have operations in 190 countries around the world, with established systems and procedures to support sales of Dongfeng-branded trucks and after-sales services,” said Svedberg.
It is still a bit early to speculate on which specific markets Volvo Group may target for DFCV’s expansion, but marketing groundwork is being laid.
In the current round-the-world Volvo Ocean Race, one of the sailing world’s top three events, a yacht named Dongfeng is among the competitors.
It successfully caught attention as the event’s first-ever Chinese stage winner by taking top line honors in the third leg of the race, from Abu Dhabi to Sanya, a city in southern China’s Hainan Province.
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