Going the distance

Volvo: in China for the long haul

Gone are the days when Swedish truck maker AB Volvo wondered if it would ever get a Chinese joint venture off the ground, never mind produce a vehicle.

“They were faking all sorts of figures,” said one Scandinavian executive in 2003, discussing Volvo’s initial attempts to form a JV with China National Heavy Truck Group, also known as Sinotruk. “They were desperate at the time and really wanted to have a foreign partner in order to get technologies and even more so capital.”

Volvo’s first JV with Sinotruk folded in 2009 after manufacturing just 1,000 vehicles. In 2015 it tried again, establishing a JV with Dongfeng Motor with a 45/55 split in the Chinese partner’s favour. The cooperation lasts to this day.

Now the Swedish group has finally got its chance to branch out in China’s commercial vehicle market on its own. In 2020, Beijing allowed foreign carmakers to fully own a domestic operation for the first time and late last month Volvo paid Rmb781 million ($120 million) for Shanxi-based JMC Heavy Truck.

As China Economic Observer points out, the deal gives Volvo a “ready-made production base” with an annual capacity of 15,000 trucks. The Gothenburg-based group’s global president, Roger Alm, believes it will now be able to take advantage of “the rapid development of China’s logistics market and the growing demand for high-end trucks and services”. China Economic Observer thinks it should do well because Volvo has “a long history and a high reputation in the international market”. In 2020, JMC Heavy recorded a Rmb522 million loss under prior owner Jiangling Motors.

However, Volvo and other global manufacturers, including Sweden’s other heavy-duty trucking giant Scania AB and Germany’s Daimler Trucks, have an exceptionally long road ahead in a market that is 97%-dominated by local rivals. Scania is currently building a production plant in Jiangsu province capable of delivering 50,000 heavy-duty trucks per year. But Volvo has a head start thanks to its Dongfeng JV. The Wuhan-based group ranks second overall for Chinese sales behind FAW Jiefiang and ahead of Volvo’s original JV partner, Sinotruk, in third place.

Times have changed considerably since Sinotruk was desperate for Volvo’s technical expertise. Today, China is at the vanguard of a fuel technology which could completely change the trucking landscape over the next 20 years: hydrogen.

Volvo and Daimler recently agreed a hydrogen fuel cell JV called Cellcentric. In May, their respective CEOs told the Financial Times that production would begin in 2025. Volvo wants 50% of all truck sales to be either battery, or hydrogen fuel cell-based by 2030.

In China, the capital city Beijing alone plans to get 10,000 hydrogen fuel cell vehicles on the road by 2025. The central government is piloting a number of other city clusters for the technology too. Hydrogen fuel cells have an 800km range and can charge within 15 minutes, making them ideal for heavy-duty trucks, which operate across long distances and require fast turnarounds. As we wrote in WiC537, they’re not as green as they could be (yet), given their ultimate energy source is still coal (though this may change as renewable power gets cheaper).

Chinese heavy-duty truck manufacturers are starting to ramp up deliveries of hydrogen-powered vehicles. This August, a consortium comprising Dongfeng, Foton, Dayun and Great Wall Motor subsidiary FTXT delivered 100 hydrogen-powered trucks for the Xiongan smart city project in Hebei province.

The trucks will transport construction materials on a new highway from Baoding to the new ‘auxiliary capital’ Xiongan (see WiC361). Over the next five years, the plan is to increase their number to 1,000 and build six to 10 refuelling stations along the way.

August also saw another heavy-duty truck maker, Baotou Beiben, sign a cooperation agreement with State Power Investment Crop and Shaanxi Iron and Steel. The steel group took delivery of a first batch of 45 electric trucks to help it meet its environmental targets.

As for Volvo, according to Reuters, it plans to list on Nasdaq this year, which could benefit Geely. In 2017, the Chinese group became the largest shareholder in the Swedish-headquartered trucking group, having purchased Volvo’s car business in 2010.

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