Company divests 70% stake to focus on premium products and targeted market segments in China's construction industry
24 Jun 2025 | 1174 Views | By Angitha Suresh
Volvo Construction Equipment has agreed to sell its majority stake in Chinese subsidiary SDLG to a fund controlled by the Lingong Group for SEK 8 billion ($700 million), the Swedish construction equipment manufacturer announced. The transaction will generate a positive impact of SEK 1 billion on operating income when completed.
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Volvo Construction Equipment has agreed to sell its majority stake in Chinese subsidiary SDLG to a fund controlled by the Lingong Group for SEK 8 billion ($700 million), the Swedish construction equipment manufacturer announced. The transaction will generate a positive impact of SEK 1 billion on operating income when completed.
The sale involves Volvo CE's entire 70% ownership in Shandong Lingong Construction Machinery Co to a fund predominantly owned by SDLG's minority shareholder, the Lingong Group. The transaction is expected to close in the second half of 2025, subject to regulatory approvals and other standard conditions.
Volvo CE acquired its majority stake in SDLG in 2006 as part of a strategy to access China's domestic construction equipment market. The Lingong Group remained as a minority shareholder throughout the partnership. SDLG contributed approximately 2% of Volvo Group's total revenue in 2024, with minimal impact on operating income.
"SDLG has served us well since 2006. However, with increasing competition, the need to transform to new technologies as well as strengthening the interaction with customers, we need to re-focus," said Melker Jernberg, Head of Volvo CE.
Following the divestment, Volvo CE plans to concentrate on offering premium Volvo-branded products and services to specific customer segments in China. The company will target key sectors including mining, quarry and aggregates, and heavy infrastructure projects. This approach represents a shift from the broader market strategy pursued through SDLG.
China will continue to serve as a production and development center for Volvo CE, supporting both domestic and export markets. The company has operated an excavator manufacturing facility in Shanghai since 2002 and recently announced plans for new production lines. Volvo CE intends to leverage China's competitive industrial environment and supplier ecosystem as part of its ongoing operations.
The transaction is expected to result in a negative tax impact of SEK 1.6 billion, subject to currency fluctuations. Both figures related to the transaction's financial impact may vary depending on exchange rate movements before closing.
Volvo CE stated that both companies believe pursuing independent business strategies will be mutually beneficial. The divestment allows SDLG to operate under full control of its original Chinese ownership while enabling Volvo CE to focus resources on its premium market positioning in China's construction equipment sector.