Volkswagen’s Scania Opens $2.3 Billion Truck Factory in China
Western Heavy-Duty Truck Makers Have Struggled to Gain Foothold in China
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Volkswagen AG truck brand Scania AB has opened a 2 billion-euro ($2.3 billion) manufacturing facility in China to supply trucks in the world’s biggest market as well as export to Asia.
The site in Rugao, Jiangsu Province, has a capacity for 50,000 vehicles annually with production due to start before the end of the year, Scania said Oct. 15.
Total vehicle deliveries for the Swedish brand stood at just over 102,000 units last year, and the new factory in China marks the manufacturer’s largest single investment to date.
A modular production strategy will allow Scania to tailor output to local demand and innovation, the company said, which will also start making a new truck product range called Next Era at Rugao.
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Western heavy-duty vehicle makers’ efforts to gain a foothold in China have so far struggled with a lack of profitability amid local competition.
“Our approach in China is to develop the market towards more sustainable solutions, towards more long-term ownership, towards more services,” Scania CEO Christian Levin said in an interview. “We think we have a really good chance to substantially increase volumes.”
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The opening of the plant comes at the same time as some of Scania’s main rivals are reassessing their presence in the country. In July, Daimler Truck Holding AG CEO Karin Radstrom flagged that the company might no longer need to keep a manufacturing footprint in the country, citing difficulties i reaching profitability.
Last year, Daimler Truck booked a 120 million-euro impairment on its local joint venture after sales of diesel-powered trucks slumped amid a shift toward liquefied natural gas models. China’s truck market is dominated by state-backed domestic manufacturers like Sinotruk, Dongfeng, Foton and FAW Group.
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Scania, which will fully own the Rugao plant, expects to benefit from China taking strides in truck electrification and digitization, said Levin who also heads up Traton SE, VW’s listed truck unit comprising the MAN, Navistar and Volkswagen Truck & Bus brands.
China has “been moving at the speed of light, meaning that it’s also very important to be here with research and development and learn to work together with partners, suppliers, engineers, researchers and universities,” he said. This will target “technology developed in China not just for China but for products around the world.”
