AB Volvo of Sweden has officially taken over the UD truck business in Thailand, ending a two-year legal dispute with Hong Kong-listed Tan Chong International.
Tan Chong, licensed by Nissan Diesel Motor (NDM) of Japan to assemble and distribute UD trucks in Thailand in 2002, charged the Swedish truck maker with breaching various terms of distribution and technical assistance agreements dated Dec 27, 2002.
It was seeking compensation of HK$2.64 billion (10.6 billion baht) for damages early last year.
AB Volvo acquired the UD truck business worldwide by taking over NDM in 2007.
The pair settled legal proceedings in September this year, with Volvo required to pay a settlement to Tan Chong.
Volvo Group Thailand, the authorised assembler and distributor of Volvo trucks in Thailand, has managed UD trucks locally since Dec 1 this year, while Tan Chong remains contracted to assemble UD trucks to 2013 to ensure a seamless transition.
“The terms of the agreement are confidential,” said Christophe Martin, president of Volvo’s Thai unit.
Some 3 billion baht will be invested to raise the truck capacity of the Thai Swedish Assembly (TSA) plant on Bang Na-Trat Road to include UD truck assembly and distribution.
It will also expand its sales and service network.
A few years back, Volvo spent 1 billion baht to improve its TSA plant.
For this upgrade, 2 billion baht will be slated to expand dealer outlets and workshops to 15 by next year, up from the six, to handle the larger product range.
Some UD truck dealers that previously worked with Tan Chong have approached Volvo Group to continue their UD truck business, he said.
Another one billion will go to TSA plant expansion to raise its truck capacity by 20 times to 20,000 units per year by 2013. About 80% of output will be slated for UD trucks with the remainder for Volvo.
Tan Chong was assigned to assemble UD trucks at the Mitsubishi Fuso plant in Lat Krabang until Volvo is ready in 2013.
Tan Chong bought Mitsubishi Fuso operations in Thailand from Daimler of Germany, which owned an 85% stake in Mitsubishi Fuso Truck and Bus of Japan after starting legal proceedings with AB Volvo.
The current Euro 3 models of UD trucks to be built by Tan Chong will be available locally next March or April. How many units are built will depend on Tan Chong.
During its peak years, as many as 1,500 UD heavy-duty (rigid and tractor head) trucks were sold each year, over 15% of the market share in Thailand.
Mr Martin said Volvo plans to regain that 15% share of the heavy-duty truck market within three years.
By then, the heavy-duty truck market will be between 13,000 to 14,000 units, up from 10,000 to 11,000 this year, with 85% Japanese brands.
There are 8,000 UD trucks in the country, with 3,000 to 4,000 actively used.