Volvo has agreed to acquire 45 percent of a Donfeng Motor Group (DFG) subsidiary that manufactures medium- and heavy-duty vehicles for RMB 5.6 billion.
DFG had partnered with Nissan Motors on the medium- and heavy-duty operation, Donfeng Commercial Vehicles, before recently purchasing it outright.
The transaction is subject to regulatory oversight, and both parties hope the deal can be consummated by January 2014.
Volvo sold 180,000 trucks in 2011, while DFG sold 186,000 that year. According to a Volvo press release, the deal makes the company the largest manufacturer of heavy-duty trucks.
Volvo Group Chief Executive Officer Olof Persson said this acquisition helps the company achieve its goal of expanding its reach in Asia. He said China’s market is the size of the European and North American markets combined. Last year, the heavy-duty market in China called for 636,000 vehicles.
“Combining Dongfeng’s strong domestic position and know-how with the Volvo Group’s technological expertise and global presence will offer DFCV excellent potential for growth and profitability in and outside China,” he said in a statement. “In Dongfeng, we have a partner that we know well, having worked together for several years, and with a management team and a product range that we really appreciate.”
Volvo will now be able to nominate four members of Donfeng Commerical Vehicles’ eight-person management team. While Donfeng nominates the managing director, Volvo will be in charge of the chief financial officer. - Jon Ross