Since the Japanese trucking market is very competitive and not very profitable, this deal will free-up cash for Volvo to compete in German, Chinese and Indian markets.
Image for Representation (Reuters)
Sweden’s Volvo AB will sell its Japan-based UD Trucks business to Isuzu Motors in a deal worth around $2.3 billion, exiting a low-margin business and boosting its cash pile as competition for high-tech trucking heats up. The deal is part of a broader alliance that will see them share advanced technology for electric and self-driving trucks and use their combined heft to cut development costs. Volvo shares rose 5 per cent in morning trading. Isuzu shares had gained 3 per cent during Tokyo trading hours.
The partnership is the latest in a growing trend among vehicle makers joining forces to better compete in an industry upended by the rise of electric vehicles, self-driving cars and other new technologies. Volvo said the transaction will add to its operating income by about SEK 2 billion ($208 million) and increase its net cash by SEK 22 billion.