Volvo completes acquisition of 45 percent of Dongfeng Commercial Vehicles

AB Volvo has completed the acquisition of 45 percent of the Chinese automotive manufacturer, Dongfeng Commercial Vehicles Co. The purchase consideration amounted to RMB 5.5 billion (Rs 5,599 crore).

As announced earlier, AB Volvo signed an agreement in January 2013 with the Chinese automotive manufacturer, Dongfeng Motor Group Company Limited (DFG), to acquire 45 percent of a subsidiary of DFG, Dongfeng Commercial Vehicles Co (DFCV). DFCV includes most of Dongfeng’s operations in heavy-duty and medium-duty commercial vehicles.

To implement the transaction, a number of conditions had to be fulfilled, including approval from the Chinese competition authority and other relevant authorities. All approvals have been received. This transaction will significantly strengthen the Volvo Group’s position in medium-duty trucks while the Group will become one of the world’s largest manufacturers of both medium-duty 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,” says Volvo’s President and CEO, Olof Persson. “At the same time, it will provide us with the opportunity to become involved in growing DFCV’s international business in a manner that will benefit us and our Chinese partner.”

In 2013, DFCV’s pro-forma sales amounted to RMB 35 billion (Rs 35,630 crore) and the pro-forma operating income to RMB 950 million (Rs 967 crore). The total Chinese market for heavy-duty trucks amounted to about 774,000 vehicles in 2013, while the corresponding figure for the medium-duty truck market was 286,000 vehicles. DFCV had a leading position in both the heavy-duty and medium-duty segments, with sales of 120,600 heavy-duty trucks and 51,000 medium-duty trucks, corresponding to market shares of 15.6 and 17.8 percent, respectively.

During the first three quarters of 2014, DFCV’s sales amounted to RMB 26 billion (Rs 26,468 crore) and the operating profit to RMB 1.1 billion (Rs 1,119 crore). During the same period, DFCV sold 85,000 heavy-duty and 31,000 medium-duty trucks. On September 30, 2014, DFCV had a net financial asset of RMB 3 billion (Rs 3,054 crore) (2014 un-audited).