Volvo Completes 45% Acquisition of China’s Dongfeng Commercial Vehicles

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Transport Topics / January 5, 2015

Volvo AB said January 5 it completed its 45% acquisition of Chinese automotive manufacturer Dongfeng Commercial Vehicles Co. for about $885 million.

Volvo signed an agreement in January 2013 with Dongfeng Motor Group Co. to acquire the stake of that company’s commercial-vehicle unit, which includes most of Dongfeng’s operations in heavy-duty and medium-duty commercial trucks.

Volvo said the deal, which was since approved by Chinese authorities, “will significantly strengthen its position in medium-duty trucks” and make it one of the world’s largest manufacturers of medium- and heavy-duty trucks.

“This strategic alliance is a real milestone and entails a fundamental change in the Volvo Group’s opportunities in the Chinese truck market, which is the largest in the world,” Volvo Group CEO Olof Persson said.

“It will provide us with the opportunity to become involved in growing [Dongfeng’s] international business in a manner that will benefit us and our Chinese partner,” he said in a statement.

The Chinese market for heavy-duty trucks totaled about 774,000 vehicles in 2013, while the corresponding figure for the medium-duty truck market was 286,000 vehicles, Volvo said.

Dongfeng had “a leading position in both the heavy-duty and medium-duty segments” that year, with sales of 120,600 heavy-duty trucks and 51,000 medium-duty trucks, with market shares of 15.6% and 17.8%, respectively, Volvo said.

Its pro-forma 2013 sales were about $5.6 billion, with pro-forma operating income of about $150 million.

In the first three quarters of 2014, Dongfeng’s sales were about $4.2 billion, with an operating profit of about $18 million, and it sold 85,000 heavy-duty and 31,000 medium-duty trucks.

Volvo, which makes Volvo and Mack brand trucks in the United States, said it expects its ownership in Dongfeng will be consolidated this month and to be reported as part of its trucks segment.