Volvo bullish on China truck market despite problems

Volvo Group is aiming for a bigger slice of the Chinese market for heavy-duty trucks, even though it is still dominated by domestic Chinese firms and is likely to see a slowdown in growth this year due to macroeconomic headwinds, a senior executive of the Swedish company told the Global Times during the Boao Forum for Asia 2012, which ran from Saturday to Tuesday.

"We look favorably upon the prospects for trucks in China, even though foreign firms only have a small share of the market. We've seen a small increase (in sales volume) over recent years, and I think we will sell more trucks in China in the future," Par Ostberg, executive vice president of Truck Joint Ventures at Volvo AB, said in an exclusive interview with the Global Times.

Sales of medium- to heavy-duty trucks in the country hit around 1 million units last year, including those exported overseas, with roughly 98 percent being made by Chinese truck manufacturers, according to Zeng Zhiling, director of LMC Automotive Asia Pacific Forecasting.

"Foreign-made trucks have much higher performance, but their higher prices limit their sales in the country," Zeng told the Global Times.

According to Ostberg, Volvo sold a couple of thousand trucks in China last year, compared to its total global sales of close to 250,000 trucks.

But despite tough competition, Volvo and other foreign truck makers are still tempted by the domestic market.

"I think the demand for high-performance trucks will increase in China, which will provide opportunities for the European manufacturers to increase their share of the market," said Ostberg.

The Swedish company, currently the world's second largest heavy-duty truck manufacturer after Daimler AG, has been focused on its truck business since it sold its car division to Ford Motor Co in 1999.

China's market for heavy-duty trucks is expected to see a slight slowdown this year due to macro headwinds including high interest rates and lackluster export expectations, Ostberg also said, while predicting stable sales for the whole year. "It will probably be around the same number as last year."

LMC Automotive's Zeng said that foreign firms may gain more opportunities domestically through building partnerships with local manufacturers.

Daimler announced in February the establishment of a joint venture with Beijing-based Foton after years of negotiations between the two sides. There have also been media reports about Volvo's plans to set up a joint venture with Dongfeng Motor to produce commercial vehicles.

But Ostberg rebuffed the reports. "There are no such plans for the time being," he said.

Volvo is partnering with Dongfeng in an indirect way, through a joint venture in Hangzhou. The joint venture was set up in 1996 between the Japanese truck maker UD Trucks, which was acquired by Volvo in 2007, and Dongfeng.

"We are currently looking into different ways of developing that joint venture hopefully to something more significant in the years to come. But it's a bit too early to say exactly how that will happen," Ostberg said.