Volvo’s UD Truck unit to end production of medium trucks

[kscarbel2]

Nikkei Asian Review / February 17, 2016

Volvo Group subsidiary UD Trucks will stop manufacturing midsize models in Japan, procuring such vehicles from Isuzu Motors as the company channels those resources into development and production of larger trucks.

UD plans to sell rebadged Isuzu trucks beginning next year under an original equipment manufacturing agreement, Volvo Group said Tuesday. Those vehicles, which will be based on the Isuzu “Forward” medium truck, will be supplied from Isuzu's Fujisawa plant in Kanagawa Prefecture.

UD's Ageo plant in Saitama Prefecture will cease production of medium trucks for Japan in 2017.

The Japanese truckmaker aims later to stop making medium trucks for overseas markets as well. The plant will continue manufacturing large trucks.

This is the company's second OEM agreement with Isuzu. The first one, covering light trucks, began in 1995 but was terminated in 2014 as UD switched the procurement source to Daimler subsidiary Mitsubishi Fuso Truck and Bus.

With the transport ministry tightening emissions controls for trucks and buses, new trucks released after this summer will have to meet new standards. UD, which holds only around a 6% share in the domestic midsize truck market, decided to source the vehicles from another manufacturer rather than developing a new model by itself.

Though UD will be selling only OEM models in the Japanese light and medium truck segments, the company will focus on raising its domestic share in large trucks to 25% from the current 17% as soon as possible.

In 2015, UD sold over 2,000 medium trucks in Japan. But that number was less than one-quarter of the company's sales for large trucks. Outside Japan, UD aims to bolster efforts to cultivate emerging markets by manufacturing models targeting them in Thailand and elsewhere.

Japan's combined sales of medium and large trucks rose 1.4% to 89,321 units in 2015, increasing for the sixth consecutive year. Demand has been robust from the construction and distribution industries, which have benefited from building projects related to the 2020 Summer Olympics in Tokyo and the growing popularity of online shopping, respectively.

UD, which traces its roots to Nissan Diesel Motor Company, has struggled to rise from its bottom market position, as truckmakers Hino, Isuzu and Fuso have more extensive service networks.

[kscarbel2]

Volvo Group acquired NIssan Diesel (aka UD) in 2007 for US$1.1 billion (7.5 billion kronor), and now will sell rebadged light and medium commercial trucks.

The high-end Quon heavy truck range, and decontented Quon-derivative Quester, will remain.......for now.

[Dirtymilkman]

They did what was planned. Eliminate competition.

[kscarbel2]

They did what was planned. Eliminate competition.

I'm not so sure. Volvo Group has rather serious financial difficulties now, one reason being ousted CEO Olof Persson poor and costly decisions. Even Volvo Construction Equipment is on the board table for sale consideration, because it's faintly profitable.

I feel, before Nissan Diesel was sold to Volvo, that Nissan for some time was failing to adequately invest in its commercial truck unit so as to keep it relevant.

Did Volvo spend US$1.1 billion just to get UD's new four- and six-cylinder engines? That doesn't add up to me.

I believe Volvo bought UD to embed in Asia. The problem is, Volvo doesn't understand Asia for the most part. Look at the failure of the Quester launch.