Volvo to Form Truck Venture with China’s Dongfeng

Volvo AB has agreed to form a commercial truck joint venture with Dongfeng Motor Group Co.

The partnership would make Volvo the world's largest producer of heavy-duty trucks, according to the company. It currently ranks third after Dongfeng and market-leader Daimler.

The tie-up is subject to approval by Chinese regulatory authorities. The partners aim to complete the deal in about a year. Dongfeng and Volvo's UD Trucks unit already operate a small-scale commercial-vehicle joint venture in Hangzhou.

Volvo will invest 5.6 billion yuan (€670 million) for a 45% stake in the venture, to be called Dongfeng Commercial Vehicles. The maker of Mack and Volvo trucks says it will share engines and powertrain components, product platforms and purchasing with the partnership.

Dongfeng Motor, which will own the balance, plans to contribute a majority of its medium- and heavy-duty commercial vehicle business to the venture. The truckmaker recently acquired most of those operations from its car and truck joint venture with Nissan.

Dongfeng and Volvo each will name four members of the venture's management team. Dongfeng will appoint the managing director and four of the seven-members board.

The Chinese company aims to make Dongfeng a global truck brand. Volvo expects to gain a major foothold in China, which CEO Olof Persson calls the "missing link" in the company's global strategy.

In 2011, the Swedish company sold 1,000 imported Volvo brand trucks and 900 units made by its existing venture with Dongfeng. Volvo's previous joint venture with China National Heavy-Duty Truck Corp. was dissolved in 2006 because annual sales totaled only 200 trucks.