Volvo to Become World’s Largest Heavy-Duty Truck Manufacturer Following
Strategic Alliance with Chinese Company Dongfeng Motor Group
GÖTEBORG, Sweden -- January 25, 2013
AB Volvo has signed an agreement with the Chinese vehicle manufacturer
Dongfeng Motor Group Company Limited (DFG) to acquire 45% of a new subsidiary
of DFG, Dongfeng Commercial Vehicles (DFCV), which will include the major part
of DFG’s medium- and heavy-duty commercial vehicles business. At completion of
the transaction, the Volvo Group will become the world’s largest manufacturer
of heavy-duty trucks. “This is a very exciting venture that will combine the
best of two worlds, strengthening the positions of the Volvo Group and
Dongfeng and offering excellent opportunities to both parties,” says Volvo’s
President and CEO Olof Persson. “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.”Completion of the transaction is subject to certain
conditions, including the approval of relevant anti-trust agencies and Chinese
authorities. The purchase consideration amounts to RMB 5.6 billion. The
ambition is to complete the transaction as soon as possible and completion is
expected to take place within approximately 12 months from today.
The transaction with DFG follows the recent agreement between DFG and Nissan
Motors, in which DFG purchased the medium- and heavy-duty commercial vehicle
operation from the joint venture DFL (owned jointly by DFG and Nissan Motors).
The major part of the re-purchased commercial vehicle operation will be
included in the new company, Dongfeng Commercial Vehicles (DFCV). According to
the agreement between DFG and Volvo, Volvo will acquire 45% of Dongfeng
Commercial Vehicles for a total amount of RMB 5.6 billion, subject to
adjustments, to be paid on closure of the transaction. Payment of the purchase
price will increase Volvo’s net debt by approximately SEK 6 billion.
The Volvo Group is the world’s third largest manufacturer of heavy-duty trucks
with 180,000 units sold in 2011. Dongfeng was the second largest producer of
heavy-duty trucks in 2011, with total sales of 186,000 units, of which
approximately 142,000 units were produced by the part of the company that will
be included in DFCV.
“We are pursuing a clear strategy to achieve our vision of becoming the world
leader in sustainable transport solutions,” says Olof Persson. “With this
agreement in place, we take a crucial step toward reaching a number of our key
strategic objectives such as size and growth in Asia.”
In 2011, DFCV reported net sales of approximately RMB 39 billion (pro forma)
and operating income of approximately RMB 1.2 billion (pro forma). DFCV has
approximately 28,000 employees and sold 142,000 heavy-duty trucks and 49,000
medium-duty trucks in 2011 (pro forma).
For the first three quarters of 2012, DFCV’s net sales amounted to
approximately RMB 22 billion (pro forma) and operating income to approximately
RMB 0.3 billion (pro forma). During the same period, 81,000 heavy-duty trucks
and 35,000 medium-duty trucks were sold by DFCV (pro forma). At the end of the
third quarter of 2012, DFCV had net financial debt of approximately RMB 500
million (pro forma). The AB Volvo holding in DFCV is expected to be reported
as an associated company and consolidated in accordance with the equity
method, one-line consolidation, within the Trucks segment.
During 2012, the Chinese market for heavy-duty trucks totaled approximately
636,000 vehicles, while the corresponding figure for the medium-duty market
was 290,000 vehicles. DFCV occupied a leading position in China in both the
heavy- and medium-duty segments, with sales of 102,000 heavy-duty trucks and
45,500 medium-duty trucks, corresponding to market shares of 16.1% and 15.7%,
“China is the world’s largest truck market with a total market for heavy
trucks equivalent to the European and North American markets combined,” says
Olof Persson. “The partnership between the Volvo Group and DFG will strengthen
DFCV’s already strong position in China and provide the company with the right
conditions for successful international expansion.”
The partnership with DFG not only provides the Volvo Group with ownership in
the largest heavy-duty and medium-duty truck manufacturer in China, but also
offers excellent opportunities to achieve economies of scale in terms of
sourcing, development and production for the Group’s truck operations. There
are a number of areas in which cooperation is planned between DFCV and Volvo,
such as engines and powertrain components, product platforms and purchasing.
“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,” says Olof Persson, Volvo President and CEO. “Joining forces will
provide clear benefits for both parties and the right conditions to develop
DFCV into a competitive and successful international truck manufacturer with
“This partnership will enable us to significantly strengthen the Group’s
position, both in and outside China,” says Olof Persson. “With DFG as a
partner, we can improve our position in the increasingly important Chinese
market and become more internationally competitive by virtue of the Chinese
The DFCV management team will consist of eight members, with Volvo nominating
four of the eight members and Dongfeng the remaining four. Dongfeng will
nominate the company’s Managing Director, while Volvo will be responsible for
nominating the Chief Financial Officer. The Board of DFCV will comprise seven
board members and it has been agreed that the Volvo Group will account for
three places and DFG four.
The transaction is subject to certain conditions, including approval of
relevant authorities. The ambition is to complete the transaction as soon as
possible and completion is expected to take place within approximately 12
months from today.
January 26, 2013
Information about press conference and
There will be a press conference in Beijing hosted by the Volvo Group and
Dongfeng Motor Group Company Limited followed by a webcast with Volvo
management. The press conference is today at 11.00 a.m. Chinese time (3.00
a.m. CET) at the InterContinental Beijing Beichen Hotel.
At 11.00 a.m. CET the Volvo Group will hold a webcast with Olof Persson,
President and CEO of the Volvo Group. To view the webcast and down load the
presentation material, please visit www.volvogroup.com/investors. You can also
dial in using the following numbers:
SE: +46 (0)8 506 307 79 UK: +44 (0)844 571 8957 US: +1 866 682 8490
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The Volvo Group is one of the world’s leading manufacturers of trucks, buses
and construction equipment, and drive systems for marine and industrial
applications. The Group also provides complete solutions for financing and
service. The Volvo Group, which employs about 115,000 people, has production
facilities in 20 countries and sells its products in more than 190 markets. In
2011, annual sales of the Volvo Group amounted to about SEK 310 billion. The
Volvo Group is a publicly-held company headquartered in Göteborg, Sweden.
Volvo shares are listed on OMX Nordic Exchange Stockholm. For more
information, please visit www.volvogroup.com or www.volvogroup.mobi if you are
using your mobile phone.
AB Volvo (publ) is required to disclose the information provided herein
pursuant to the Securities Markets Act and/or the Financial Instruments
Trading Act. The information was submitted for publication at 02:30 a.m. on
January 26, 2013.
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