Volvo Construction Equipment (Volvo CE) has signed a contract to sell its ownership in China-based SDLG (Shandong Lingong Construction Machinery Co) to a fund predominantly owned by the Lingong Group (LGG). Going forward, Volvo CE will be targeting focused customer segments in China and enhance its utilisation of the Chinese supplier ecosystem.

This means Volvo CE will:

• Sell its entire stake of 70% of the shares in SDLG to a fund predominantly owned by the SDLG minority owner LGG.

• Focus on offering Volvo branded premium products and services to focused customer segments in China.

• Utilise its system in China as a production centre serving both the domestic and export markets.

• Continue to strengthen the Jinan Technology Centre (JTC) into the global technology system to maximise the product development opportunities in China for the rest of the world.

In 2006, Volvo CE acquired a majority stake in SDLG, with LGG as a minority shareholder. This strategic investment gave Volvo CE access to the important domestic Chinese construction equipment market. The SDLG collaboration has been successful, but for strategic reasons, Volvo and LGG now believe it would be mutually beneficial to pursue independent business strategies. Therefore, both parties have agreed that a fund predominantly owned by the LGG will take ownership of Volvo’s SDLG shares. 

Melker Jernberg, head of Volvo CE, said, “SDLG has served us well since 2006. However, with increasing competition, and the need to transform to new technologies as well as strengthen interaction with customers, we need to refocus. China remains an important market for us, and we aim to capitalise on our opportunities by focusing on sustainable solutions in targeted segments. We also plan to leverage the excellent industrial system in China.” 

Specific targeted segments 

Volvo CE will maintain its strategic focus on leading the development of sustainable solutions in the Chinese construction industry, targeting key segments such as mining, quarry & aggregates, and heavy infrastructure. The emphasis will be on providing tailored and comprehensive solutions that address specific customer needs while developing a sustainable distribution roadmap suited to the highly competitive landscape. 

The operations in China serve as a globally competitive production centre, catering to both domestic and export markets. To leverage the quality and cost advantages present in the competitive industrial environment, Volvo CE has operated an excavator production facility in Shanghai since 2002 and recently announced the establishment of new production lines. Moving forward, China will remain a crucial part of the company’s value chain and a base for numerous suppliers, both domestic and international.

A key component of Volvo CE China strategy is to continue to strengthen its Jinan Technology Centre (JTC) into the extensive global technology system, which aims to foster innovation and collaboration on a global scale. This involves ownership of products and establishing a common architecture to be utilised worldwide.

Volvo CE stressed that the company “remains dedicated to innovation and collaboration globally, ensuring that our solutions not only meet the needs of today, but also pave the way for a sustainable future.”