Dongfeng Motor Group Co Ltd and AB Volvo signed an agreement in Beijing on Jan 26 to establish a joint venture, Securities Daily reported Monday.

Internal sources from Dongfeng Commercial Vehicles told Securities Daily that the two parties have recently signed an agreement. The follow-up work will begin after the Spring Festival holiday, which goes from Feb 9 to 15 this year. The joint venture will be formally founded within this year.

The joint venture will be located in China's central city of Shiyan, Hubei province. It will undertake the task of research and development, production, and sales of Dongfeng brand vehicles. The products cover medium-and-heavy-sized trucks, vans, special vehicles, chassis, engines and gearboxes.

In the context of a sluggish domestic market for commercial vehicles, Dongfeng needs to ensure that its medium- and heavy-sized commercial vehicles are in line with its international development strategy, Zhu Fushou, general director of Dongfeng Motor Group, told Securities Daily.

Volvo will acquire a 45 percent stake in the company, with 5.6 billion yuan ($899.2 million), and the other 55 percent stake will be subscribed by Dongfeng's existing assets of commercial vehicles. The total investment of the project will amount to around 12.5 billion yuan.

Previous reports

Volvo to be largest truck maker after Dongfeng deal

Dongfeng Motor, Volvo to set up truck JV