Renault Trucks, part of the giant Volvo AB group, has reached an acquisition agreement with Dongfeng Motor Corp and will manufacture 7,000 heavy trucks annually in China over the next five years.

Sweden-based Volvo revealed the agreement on its Website. It said that the deal enables Renault Trucks to acquire a share of the capital in Dongfeng Liuzhou Motors. The company is a subsidiary of Dongfeng, one of the "big three" vehicle makers in China along with First Automobile Works and Shanghai Automotive Industry Corp.

Zhu Jiefei, a spokesman for Dongfeng, confirmed the agreement that was signed in Paris, Thursday.

"The talks were kicked off last year and they are undergoing final negotiations for price and ownership interests," said Zhu, adding details may be available next month.

Dongfeng said previously that it would have a controlling share in the new company after the participation of Renault. The French automaker is supposed to contribute technology, branding, products and some capital to the venture.

The agreement is pending approval by the Chinese regulatory authorities.

Volvo said that the goal was for the agreement to be finalized this year.

Initially, the agreement aimed to establish local assembly of knockdown kits of Renault Kerax trucks. The long-term aim, however, is to manufacture components for Renault and Dongfeng Liuzhou's local product range.

The restructured Dongfeng Liuzhou is expected to start manufacturing Renault trucks in the second half of this year and mass production may start next year.

Dongfeng Liuzhou, the heavy truck maker under Dongfeng, sold about 20,000 trucks domestically last year.

In October 2002, Renault Trucks signed an agreement with Dongfeng regarding technology transfer relating to its 11-liter dCi 11 engine. It marked the start of collaboration between the two companies.

Last year, truck sales in China reached 1.21 million units, a 10.35 percent rise year-on-year.

Domestic truck manufacturing is expected to reach about 1.34 million units this year.

(eastday.com January 30, 2004)