GOTHENBURG, SWEDEN – AB Volvo has completed the acquisition of 45% of the China’s Dongfeng Commercial Vehicles Co., Ltd. (DFCV).

The purchase consideration amounted to 5.5 billion yuan – equivalent to about US $885 million.

The deal goes back two years, to January 2013 when AB Volvo signed an agreement with Dongfeng Motor Group Company Ltd. to acquire 45% of its commercial vehicle subsidiary, DFCV.

DFCV includes most of Dongfeng’s operations in heavy-duty and medium-duty commercial vehicles.

A number of conditions had to be fulfilled, including approval from the Chinese competition authority and other relevant authorities. All approvals have now been received.

According to AB Volvo, this transaction will significantly strengthen its position in medium-duty trucks, and make it one of the world’s largest manufacturers of both medium-duty and heavy-duty trucks.

“This strategic alliance is a real milestone and entails a fundamental change in the Volvo Group’s opportunities in the Chinese truck market, which is the largest in the world,” says Volvo’s president and CEO, Olof Persson. “At the same time, it will provide us with the opportunity to become involved in growing DFCV’s international business in a manner that will benefit us and our Chinese partner.”

In 2013, DFCV’s pro-forma sales amounted to 35 billion yuan – about US $5.6 billion.

The total Chinese market for heavy-duty trucks amounted to about 774,000 vehicles in 2013, while the corresponding figure for the medium-duty truck market was 286,000 vehicles.

DFCV had a leading position in both the heavy-duty and medium-duty segments, with sales of 120,600 heavy-duty trucks and 51,000 medium-duty trucks, corresponding to market shares of 15.6 and 17.8%, respectively.

AB Volvo’s ownership in DFCV is expected to be recognized as an associated company and will be consolidated as of January 2015 according to the equity method and reported in the trucks segment.