Volvo Car Corporation, which already has two joint venture partners in China, plans to dismantle one of the joint venture partnerships, and then “tie†with Dongfeng Motor. It is reported that Jinan Huawo Truck Co., Ltd. (referred to as: Huawo Truck) will likely be abandoned by Volvo, but Huanong Truck's another shareholder China National Heavy Duty Truck yesterday said that Sinotruk still hopes to cooperate with Volvo Cars.
Faced with 500 million Swedish kronor losses
The reporter learned yesterday that Volvo Cars, which is currently negotiating cooperation with Dongfeng Motor, intends to end its cooperation with Sinotruck. Once this decision is made by Volvo Cars, it will face a cost loss of up to 500 million Swedish kronor (equivalent to US$72 million): 300 million Swedish kronor has already invested in the construction of the Waldorf truck factory, and the other cost is about 200 million Swedish kronor.
Volvo Motors did not reveal the specific reasons for dissolving the joint venture relationship with Sinotruk. Volvo spokesperson Maarten Wikforss only stated that the engine plant of the joint venture between Volvo Cars and Sinotruk has not been mass-produced because there is not enough demand.
In 2004, Sinotruk, Volvo and FAW Group originally planned to establish a joint venture to produce diesel engines. The cooperation framework agreement signed by the three parties shows that the investment in the joint venture project will reach RMB 2 billion and will be put into production in 2005. By 2008, it will reach an annual production capacity of 50,000 sets of high-powered engines. However, in 2005, Wu Yuzhang, then Vice President of Volvo Truck Asia in Asia and President of Greater China, announced that the tripartite cooperation was canceled. This matter is also regarded as a precursor to Volvo's cooperation with Sinotruck.
Yesterday, the reporter called the relevant person of Sinotruk Group, said: In the 2007 work plan, Sinotruk will still be included in the scope of work with Volvo Cars. The group did not endorse the agreement between the two parties to terminate the cooperation.
Three factors promote Volvo to give up heavy steam
The reporter learned from other sources that there are many reasons why Volvo Cars wants to terminate its cooperation with China National Heavy Duty Truck.
First, the sales volume of the joint venture Huawo Trucks has been unsatisfactory and has not reached expectations.
On June 9, 2003, Volvo Cars and China Heavy-Duty Truck Group established Jinan Huawo Truck Co., Ltd. with a joint stock ratio of 50:50. On March 31, 2004, heavy trucks formally went offline from Huawo Truck. However, the sales volume of Huawo Truck is very small, only a few hundred vehicles. It is far from the ambitious plans that the two parties will formulate a contract of “2500 trucks per year by 2005 and 100,000 trucks by 2010â€. .
A person close to Huawo Truck stated that this drop was due to Volvo’s lack of understanding of the Chinese market. The minimum price of high-grade heavy trucks manufactured by Huawo Trucks is more than RMB 600,000; domestic heavy trucks are priced at RMB 400,000. Although Huawa Heavy Trucks has a higher level of heavy truck technology than Chinese local companies, price disparity scares away customers. Because the main customers of heavy trucks are transport companies, transport companies pay most attention to the return on assets when purchasing equipment.
Second, Sinotruk is not optimistic about the future of Volvo Trucks, and the relationship between Volvo Cars and China National Heavy Duty Truck is also more subtle.
"Volvo's high-end heavy trucks are not adapted to the Chinese market. Their ability to adjust products and sales has failed to comply with China's national conditions." People close to Huawo Trucks said, "Huaer Trucks only produces heavy trucks and sells them to Volvo Car Management, not China National Heavy Duty Truck sales personnel; heavy trucks need to make regional improvements based on the characteristics of China's various regions, but as a multinational company's Volvo car program is too complex, after reporting at least six months after the foreign headquarters only echo.
Third, China National Heavy Duty Truck and Dongfeng Motor are among the top three giants in China's truck market. This competitive pattern determines that Volvo Motors intends to settle Dongfeng Motors and must dispose of Sinotruk.
View related topics: China National Heavy Duty Truck Breaks Monthly Sales Record for National Heavy Truck Industry
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