Volvo and Scania Focus on Special-purpose Vehicles

With China’s high-end, heavy-duty truck market not expected to boom  for at least 10 years, global truck makers are now seeking opportunities in China’s special-purpose vehicle segment in hopes of grabbing a foothold in the world’s fastest growing economy.

“Although our major business in China still targets imports of heavy-duty trucks for logistics, we also have had breakthroughs in fire-fighting vehicles in the last two years,” said Mats Harborn, managing director of Scannia China, the local branch of Swedish commercial vehicle producer under Volkswagen AG.

The company has also began providing construction and engineering trucks to the local market this year, said Harborn.

The world’s second-largest truck maker Volvo Group, which exited a failed joint venture project with China National Heavy Duty Truck Group Co last year, also said that they were now focusing on China’s booming construction machinery market through its acquired local company Shandong Lin’gong Construction Machinery, and a manufacturing tie-up with China’s Dongfeng Motor Group which it took over from Nissan Motor.

“The demand for construction machinery is quite strong here in China as infrastructure construction is big and has huge potential, thanks to China’s booming economy,” said Leif Johansson, chief executive officer of Volvo Group.

China sold 630,000 heavy-duty trucks in 2009, up 17 percent over the previous year. And in the first four months, sales grew 132 percent to 383,000 units over last year, which made investment bank China International Capital Corp lift its full-year sales growth prediction from 10 to 15 percent previously, to 31 percent, with 838,000 units to be sold.

Johansson of Volvo also expects 25 to 30 percent market growth in China’s heavy-duty truck segment. That compared with 10 percent growth in Europe and 15 percent recovery in the North America.

However, foreign truck makers still only control a small share of the world’s biggest heavy-duty truck market, with more than 98 percent of the segment dominated by domestic manufacturers of medium- and low-end trucks, priced below 500,000 yuan ($73,210).

“Scania is still far from forming a joint venture with a Chinese partner to produce our trucks priced over 1 million yuan each,” said Harborn. “We will consider local production when we can reach 10,000 units sales someday.”

He told China Daily that the company sold hundreds of trucks last year, occupying nearly 20 percent of the premium truck market in China. “But we have to develop here steadily now for long-term existence, before China’s modern logistics will, in the future, finally require the high-end heavy-duty trucks for their high efficiency and safety appeal.”

The company launched its R-series heavy-duty trucks, the International Truck of the Year 2010 in China last week, with a price tag of 1.6 million yuan per unit.

“Although China’s market is still small, we will always bring our latest and best products to maintain our establishment here for long-term development,” said Harborn.

Johansson also sees the Asian market, led by China and India, as his company’s future growth engine, while growth has begun to stagnate in mature markets in Europe and North America. “We expect Asia to overtake Europe as our top market by 2015, with China and India contributing 60 or 70 percent to total Asian sales,” said Johansson.

As one of the top two high-end heavy-duty truck producers in China, Volvo sold almost 1,000 trucks last year across the country.

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