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Volkswagen may set up new truck JV in China

BEIJING – Volkswagen Group will increase the presence of Volkswagen Commercial Vehicles, Scania, and MAN brands in emerging markets such as China and Brazil, and is considering establishing a truck joint venture in China as well, according to Leif Östling, executive director of Volkswagen Commercial Vehicles, China Business News reported.

Sales of Volkswagen Group trucks in China are estimated to drop 25 percent year-on-year, said Östling during a media interview. Volkswagen Commercial Vehicles aims at a 4-5 percent growth per year, however, given the current global economic downturn. Volkswagen believes China would become its new growth point.

According to Östling, Volkswagen can either increase import volume from Europe, or set up new joint venture in China. MAN has established a joint venture with China National Heavy-Duty Truck Group Corp. (CNHTC) in 2009 to manufacture low- and medium-end trucks.

China’s logistics consumed around 18 percent of total costs while the proportion in Europe is 7 percent. As the acceleration of China’s urbanization, the country’s transportation system requires further improvement in efficiency, which is a huge opportunity for Volkswagen, said Östling.

“Volkswagen has been longing for expanding its commercial vehicle business in China. Besides MAN and Scania, Volkswagen Commercial Vehicles started preliminary preparation three years ago,” said Yu Chen, an industry analyst. According to the agreement between MAN and CNHTC, the two parties would jointly produce TGA truck in the Chinese market. However, mass production of related products has not been realized, and the new truck JV may go through Scania and Volkswagen Commercial branch, commented Yu Chen.

Mats Harborn, executive director of Scania China, told China Business News on September 17 that Scania will stick to its own brand and do business in China via import. “High-end heavy-duty trucks take up less than 2 percent of market share in China,” said Harborn. “Since Scania has no products fit for medium- and low-end market, we will not consider setting up joint venture at current stage,” added Harborn.

“China’s heavy-duty truck market will still be dominated by domestic brands in the next three to five years,” said Yu Chen.

The country sold 15,000 high-end import trucks in 2011 with 6,000 from Mercedes-Benz, 1,000 from Volvo, and less than 1,000 units from Scania. According to industry estimates, sales of high-end heavy-duty trucks in China will not exceed 10,000 units this year, although the market for such trucks is growing steadily now.

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