Renault Trucks, a subsidiary of Swedish truck and bus manufacturer Volvo, has finalised its agreement with Chinese truck manufacturer Dong Feng Motors to establish a joint venture operation in China for truck and truck parts production. The new venture will manufacture heavy construction trucks for the local market.
The agreement is an extension of Renault's existing joint venture with the Chinese manufacturer, which was established in October 2002. The original deal was designed to enable Dong Feng to equip its trucks with Renault engines. This co-operation was Renault Trucks' first step into the Chinese market.
In June 2003 meanwhile, Volvo Trucks signed another joint venture agreement with China National Heavy Truck Corporation for the production of trucks. This joint venture made Volvo Trucks the first western manufacturer with an industrial platform for heavy trucks in China.
Combining resources and expertise with Dong Feng, one of China's three largest truck manufacturers, should create an attractive structure for the Volvo Group, for which overseas markets - especially in Asia - are key drivers of its global growth strategy.
Thanks to continued economic growth, countries such as India and China have invested considerably in road infrastructure resulting in rising demand for efficient transport. As the largest market in the world for commercial vehicles, China is of course a key market for Volvo.
Foreign-invested joint ventures and wholly owned foreign companies are producing an increasing proportion of the commercial vehicles manufactured in China. China is extremely cost competitive and the next few years should see a large increase in component sourcing from the country. If component production takes off, Renault Trucks' venture, which will focus on parts sourcing in the long term, is set for a bright future.