Sweden’s Volvo Group and Japan’s Isuzu Motors have agreed to form a strategic alliance within the commercial vehicle sector, in accordance with a memorandum of understanding signed in 2019.
The agreement includes Isuzu Motors’ acquisition of UD Trucks from the Volvo Group for ¥243-billion.
The transaction is subject to certain conditions, including approval from regulatory authorities.
The truck makers say the alliance aims to build a long-term relationship that will encompass a technology partnership intended to leverage complementary areas of expertise within known and new technologies, and to create a larger volume base to support technology investments.
The technology partnership encompasses the joint development by Isuzu Motors and UD Trucks of common platforms for medium heavy-duty truck models for the Japanese and other Asian markets using, among others, Volvo Group technology.
It also includes cooperation regarding new technologies such as autonomous driving, connectivity and medium- and heavy-duty electrical vehicles.
The deal between the two truck makers will also aim “to create the best long-term conditions for a stronger heavy-duty truck business” for UD Trucks and Isuzu Motors in Japan and across international markets by transferring ownership of the complete UD Trucks business from the Volvo Group to Isuzu Motors.
“This will accelerate growth by leveraging greater volumes and complementary capabilities, creating significant synergies for Isuzu Motors,” says a statement on the deal.
As a first step in this acquisition process, Isuzu Motors and UD Trucks are discussing the conditions for the supply of certain truck variants from UD Trucks to Isuzu Motors from 2022 onwards.
The Volvo-Isuzu deal will also explore further opportunities “for even broader and deeper collaboration” within the two truck makers’ commercial vehicle businesses across geographical areas and product lines for future urban logistics solutions.
Isuzu Motors is regarded as one of the world leaders in the 3.5 t to 15 t light and medium-duty truck segment, with sales volumes of 252 000 units in 2019.
The alliance agreement will explore cooperation in the areas of purchasing and logistics.
To execute the agreement, the Volvo Group and Isuzu Motors will establish a joint alliance office, with facilities in Japan and Sweden, which will be overseen by an alliance board comprising the Isuzu Motors president, the Volvo Group CEO and other key executives from the two groups.
The two companies have signed an alliance framework agreement for a minimum duration of 20 years.
“I have high expectations for this strategic alliance, which will make Volvo and Isuzu Motors even more competitive within their respective markets and segments,” says Volvo Group president and CEO Martin Lundstedt.
“This is an opportunity to share technology investments and also to help each other grow. I am confident that UD Trucks will become a bridge between the Volvo Group and Isuzu Motors and that the strategic alliance will create the conditions to continue to develop UD Trucks to a new level within Isuzu Motors.
“The difficult and unforeseeable Covid-19 situation has made th[is] strategic alliance even more valuable and has built a solid, trustful relationship between Isuzu and the Volvo Group,” adds Isuzu Motors president Masanori Katayama.
“This long-term partnership will span across products, technologies and regions, and actively contribute to service improvements and strengthened customer satisfaction, as well as supporting the logistics industry.
“I am fortunate to have UD Trucks joining the Isuzu Group. UD Trucks will play an important role in the strategic alliance for efficient and effective collaboration between Isuzu Motors and the Volvo Group,” says Katayama.
What Will Happen in South Africa?
It is not yet clear what the effect of the agreement, including the sale of UD Trucks, will have on the operations of Isuzu, UD Trucks and the Volvo Group in South Africa.
All three groups have their own truck assembly plants in South Africa – in Port Elizabeth, Pretoria and Durban respectively.
“It would be premature at this stage to speculate on the impact of this development on our South African operations,” says Isuzu Motors South Africa spokesperson Denise van Huyssteen.