Jan. 26 (Bloomberg) -- Volvo AB agreed to pay 5.6 billion yuan ($890 million) for a minority stake in the commercial vehicle unit of China’s Dongfeng Motor Group Co., a transaction the Swedish company said will make it the world largest maker of heavy-duty trucks.
Volvo, the world’s second-biggest truck manufacturer, will hold a 45 percent share of the unit, which will make and sell Dongfeng-brand trucks, buses and so-called special-purpose vehicles, the Gothenburg, Sweden-based company said in a statement before a press conference in Beijing today.
Volvo is expanding in China as manufacturing in the world’s second-biggest economy grows at the fastest rate in two years, according to a survey by HSBC Holdings Plc and Market Economics. Truck deliveries are forecast to rise to 3.33 million units this year after two annual declines, according to the China Association of Automobile Manufacturers.
“China is the world’s largest truck market with a total market for heavy trucks equivalent to the European and North American markets combined,” Olof Persson, chief executive officer of Volvo, said at the press conference. The venture will improve Volvo’s position in the Chinese market and help it to become more globally competitive, he said.
Dongfeng Motor, China’s second-biggest automaker by vehicle sales, makes passenger cars with Nissan Motor Co., Honda Motor Co. and PSA Peugeot Citroen in China. In an e-mailed statement today, Nissan said it agreed to the divestment of the medium and heavy commercial vehicle business unit of its joint venture with Dongfeng.
“The alliance will help Dongfeng go outside of China,” Zhu Fushou, president of the Chinese company, said at the press conference. “It will also help reinforce branding impact of Volvo in China.”
Dongfeng will have four places on the seven-member board of the venture and Volvo three, according to the statement. Dongfeng will nominate the managing director, while Volvo will designate the chief financial officer.
Completion of the deal is subject to regulatory approvals and is expected within a year, Volvo said.
To contact the editor responsible for this story: Paul Tighe in Sydney at firstname.lastname@example.org