Gasgoo.com (Shanghai March 31) - The Dongfeng Commercial Vehicle Company, originally managed in joint venture form by Dongfeng Group and Nissan, will be totally absorbed by the former this July, Economic Observer News reported today. The move will allow Dongfeng to pursue the much anticipated joint venture with Volvo. Dongfeng will control 55 percent of the proposed JV, with Volvo owning the remaining 45 percent.

According to sources from Dongfeng, although the Commercial Vehicle Company's chief production site will be centered in Shiyan, Hubei, it is very possible its headquarters may be transferred to Zhejiang's capital of Hangzhou. "This seems to be Volvo's plan," said source said, adding that both sides were still negotiating the issue.

The Dongfeng-Nissan partnership dates back to July 2003, and specialized in selling passenger and commercial vehicles, as well as key part auto parts and other equipment. The passenger vehicle division, which focused on selling Nissan models in China, later became the Dongfeng Nissan joint venture, while the commercial vehicle division sold Dongfeng branded vehicles.

With the market for commercial vehicles in China continuing to maintain stable growth, Dongfeng has reevaluated its long-term development goals for the sector. The manufacturer reportedly aims to become China's largest commercial vehicle enterprise and the world's third largest. Due to concerns that Nissan did not share the same zeal for investing in new commercial vehicle technology, Dongfeng has been looking for another manufacturer to cooperate with. It is under this background that rumors of a possible joint venture between Dongfeng and Swedish company Volvo began to surface. The two companies came to an agreement last December, with Nissan agreeing to remove its funding from the Commercial Vehicle Company. In return, Dongfeng would support the Japanese manufacturer's plans to produce Renault and Infiniti vehicles in China. Nissan made good on its end of the deal last month, selling all relevant infrastructure to Dongfeng for the reported price of around ten billion yen ($124.27m).

There are still some steps that need to be taken before the Dongfeng Volvo JV can officially come to fruition. The Dongfeng Commercial Vehicle Company has 11 branch companies, including Dongfeng Liuzhou Motor, that reportedly still need to return to Dongfeng Group. Both Dongfeng and Nissan own 37.5 percent of Dongfeng Liuzhou, with Liuzhou Industrial Holdings controlling the remaining 25 percent. How redistribution of share holdings will be handled still remains to be seen.