Investment Updates News
- Volvo unit boosting China investments
Date: 8-Nov-2007 Sources: (Shenzhen Daily)
VOLVO Construction Equipment, a unit of Swedish truck maker Volvo AB, is increasing investments in China to capitalize on the country's growing demand for construction machinery and boost its global market share, the president of its China unit said.
Volvo Construction Equipment is the world's third-largest construction machinery maker in terms of capacity, after Caterpillar Inc. of the United States and Japan's Komatsu Ltd.
'If you want to be a clear No. 3 or attacking the No. 2 position globally, you simply can't do it without having a very significant portion of business in China,'Keith Ellis, president of Volvo Construction Equipment (China) Co., said yesterday.
'For any viable global player over the coming years, at least 15 percent of their sales have got to be in China,'he added. The China unit's sales now account for 10 percent of Volvo Construction Equipment's global revenue.
To meet that goal, Volvo Construction Equipment last month said it would invest an additional US$90 million in a 70 percent-owned Chinese company, Shandong Lingong Construction Machinery Co.
The construction equipment manufacturer acquired the stake in China's fourth-largest wheel loader maker for 327.5 million yuan (US$44 million) a year ago.
Ellis said China's demand for wheel loaders may reach close to 130,000 units this year, more than doubling the number of such products used in the rest of the world. Wheel loaders are earth-moving construction equipment.
He said he expects Shandong Lingong to increase its production capacity by 50 percent in the fairly near term. By the end of last year, the joint venture had a capacity of around 20,000 units and a market share of roughly 11 percent.
Ellis added some of the additional capacity will come from Ingersoll-Rand Co.'s road equipment business.
Earlier this year, Volvo Construction Equipment acquired the road construction equipment division of Bermuda-based Ingersoll-Rand for about US$1.3 billion.
Asked whether Volvo Construction Equipment will make another investment in the Chinese market in the near term, Ellis said: 'A lot of people are approaching us (on a potential stake sale or cooperation), but the next investment won't take place very soon.'
Despite the bright outlook for the Chinese construction equipment market, Ellis expressed concern over a potential credit risk in the industry.
'We see our large competitors offer what we think to be quite high-risk credit to customers,'said Ellis, who joined China's construction industry in the late 1990s, just as the industry was starting to take off.
He didn't name the competitors, but said: 'Frankly, we find it a little bit surprising because our competitors, most of them, have public shareholders, and most of them are listed on the Shanghai exchange or even the Hong Kong exchange.'
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