Once upon a time, it was Chinese manufacturers that benefited from their Western peers taking stakes in their capital to secure technology transfers. The relationship now works the other way round, against the backdrop of a sprint towards electrification in which the entire sector is going flat out.
AB Volvo — it should be noted that this refers to the heavy-vehicle manufacturer and not Volvo Cars — has in fact posted double-digit operating margins since its strategic shareholder came on board, significantly above the performance of Daimler Truck or Traton.
On the stockmarket, the three manufacturers’ shares have nevertheless followed similar paths over the past five years, even though AB Volvo retains a valuation premium over both its German peers. The Scandinavian — or rather, the Sino-Scandinavian — group is not better capitalized, but its higher margins justify that gap.
Note that Traton is not penalized by its ultra-low free float — Volkswagen still controls close to 90% of its subsidiary’s share capital — nor by its extraordinarily ambitious strategy, which led it to gain a foothold in the US during the pandemic with the acquisition of Navistar, and then forge a major strategic partnership with Toyota.
Daimler Truck, meanwhile, remains on a more traditional regional joint-venture model, such as in China with Beiqi Foton, and in Japan via direct control of Mitsubishi Fuso Truck and Bus Corporation. In contrast, at Volvo the relationship with Geely opens privileged channels to negotiate batteries and raw materials with Chinese suppliers that control the upstream chain.
Europe’s road transport sector is being backed into a corner by the dramatic changes seen in China. Nearly a quarter of light trucks sold in the Middle Kingdom are now electric, up from barely 4% at the end of the pandemic. Battery maker CATL predicts the figure will be more than half by the end of the decade.
However, penetration is much lower in Europe. The European Union has set aggressive targets — with a diesel ban planned around 2040 — but fewer than 4% of trucks sold are electric. In this respect, Chinese manufacturers will gain an industrial scale that could leave their European competitors at a disadvantage.
AB Volvo, Daimler and Traton have actually joined forces through Milence, a joint venture whose aim is to accelerate the rollout of truck-charging infrastructure across Europe’s road networks. In this double-or-nothing exercise, the three manufacturers cannot afford to make a mistake. Rather than obstacles, they will also need regulatory support more than ever.
