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Why joint ventures of commercial vehicle companies are difficult
The collaboration between Sweden's Volvo Group and China's Dongfeng Group is nearing its conclusion, with plans to launch their joint venture in May of next year. After a long and complex negotiation process, the two companies have finally reached an agreement on a commercial vehicle project, marking a significant step in their partnership.
Li Yongyong highlights an interesting trend in China’s automotive industry: while passenger car joint ventures have seen steady growth and success, commercial vehicle partnerships have struggled. This contrast raises an important question—why do car joint ventures thrive, while commercial vehicle collaborations often face obstacles?
According to the author, there are three main reasons behind this phenomenon. First, foreign brands tend to position themselves at the high end of the market, which doesn't always align with the needs of Chinese commercial vehicle users. Heavy truck buyers prioritize cost-effectiveness over luxury or advanced features. As a result, foreign-branded models often fail to gain traction unless there's a government mandate pushing for them.
Second, China’s commercial vehicle industry has a long history and strong technical foundation. Domestic manufacturers have developed mature technologies and management systems over decades, giving them more influence in joint ventures. When both parties have equal equity, conflicts often arise due to differing priorities, leading to stalled projects or failed partnerships.
Third, cultural differences play a key role. Commercial vehicle buyers are more practical than car consumers, who may be influenced by brand image. Foreign investors sometimes overlook local market conditions, introducing models with unnecessary features that increase costs and reduce competitiveness.
Despite these challenges, many global commercial vehicle giants continue to enter the Chinese market, drawn by its vast potential. While joint ventures remain risky, they also offer opportunities for innovation and growth. The Volvo-Dongfeng deal could serve as a model for future collaborations, showing that with the right approach, international partnerships in the commercial vehicle sector can succeed.