Volvo Construction Equipment (Volvo CE) has agreed to sell its 70% stake in Shandong Lingong Construction Machinery Co (SDLG) to a fund predominantly owned by Lingong Group (LGG) for Skr8bn ($826m).
The deal is expected to be completed in the second half (H2) of 2025, pending regulatory approvals and other conditions.
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It is anticipated to positively impact Volvo CE’s operating income by Skr1bn at closing, though this is subject to currency fluctuations. However, it will also result in a negative tax impact of Skr1.6bn, similarly affected by exchange rate changes.
The potential positive effect on operating income will be excluded from adjusted operating income. In 2024, SDLG contributed approximately 2% to Volvo Group’s turnover, with a negligible effect on the group’s operating income.
Volvo CE acquired its majority stake in SDLG in 2006, with LGG as a minority shareholder, to gain access to China’s domestic construction equipment market.
“The SDLG collaboration has been successful, but for strategic reasons Volvo and LGG now believe it would be mutually beneficial to pursue independent business strategies,” Volvo CE stated.
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By GlobalDataPost-transaction, Volvo CE will focus on offering Volvo-branded products and services to targeted customer segments in China such as mining, quarry and aggregates, and heavy infrastructure.
The company aims to provide tailored solutions to meet specific customer needs while developing a sustainable distribution strategy in China’s competitive market.
China will continue to serve as a key production and development hub for both the domestic and export markets, leveraging Volvo CE’s excavator production facility in Shanghai, operational since 2002, and recently announced new production lines.
Volvo CE also plans to enhance its utilisation of China’s supplier ecosystem, maintaining the country’s role as a critical part of its global value chain.
