Volvo reverses China strategy, sells joint venture stake

Volvo's construction equipment unit is selling its majority stake in its Chinese joint venture, Shandong Lingong Construction Machinery Co., for 8 billion Swedish Kronor, marking a significant shift in its strategy for the country.

The company said Tuesday it will sell its 70% holding in the business, known as SDLG, to a fund predominantly owned by its minority partner, Lingong Group.

The move reverses a strategy that began with the acquisition of the stake, completed in 2007, which was intended to give Volvo access to the large Chinese construction market.

In 2014, Volvo had deepened the partnership by transferring the production of some of its own branded equipment to SDLG to target the market's value segment, according to a previous filing.

Volvo will now refocus on selling its premium branded products to targeted segments in China, such as mining and heavy infrastructure, the company said.

“SDLG has served us well since 2006. However, with increasing competition, the need to transform to new technologies as well as strengthening the interaction with customers, we need to re-focus,” said Melker Jernberg, Head of Volvo Construction Equipment.

The transaction is expected to close in the second half of 2025 and result in a positive impact of 1 billion Swedish Kronor on operating income, the company said.

Volvo also noted a projected negative tax impact of 1.6 billion Swedish Kronor from the sale.

In 2024, SDLG's revenue contribution was approximately 2% of Volvo Group's total turnover with an insignificant impact on the Volvo Group’s operating income, according to the company.