Volkswagen-owned group commits €2bn to a fully owned plant in Rugao and plans to ship about half of its output to Asia and Oceania, embracing scale and flexibility amid rising geopolitical strain.

RUGAO, CHINA / STOCKHOLM – Scania will export roughly half of the trucks it builds at its new €2 billion factory in eastern China, doubling down on the world’s largest commercial-vehicle market while insulating itself against geopolitical shocks. Chief executive Christian Levin told the Financial Times the company intends to leverage China’s extensive free-trade network to sell Rugao-made vehicles across Asia and Oceania, even as Western manufacturers grow more cautious about their exposure to the country.

The plant, located in Rugao in Jiangsu province about 200 kilometres north of Shanghai, is due to start production in October. It represents Scania’s largest manufacturing investment outside Sweden in more than half a century and makes the brand — part of Volkswagen’s Traton group alongside MAN and Navistar — one of the few foreign heavy-truck makers to receive a licence to run a fully owned manufacturing operation in China. The facility adds a third pillar to Scania’s global footprint alongside Europe and Brazil.

Levin framed the strategy as a hedge against uncertainty and a way to stay close to technology being developed by fast-moving Chinese rivals. “I’d rather take on the competition in their home market,” he said in an interview this week, arguing that proximity to suppliers of batteries, power electronics and advanced manufacturing is now a competitive necessity. The company expects at least half of Rugao’s trucks to be exported to regional markets, with domestic sales focused on premium segments that demand higher uptime and lower lifecycle costs.

Capacity will ramp over several years. Industry disclosures place the site’s nameplate at about 50,000 trucks a year once fully tooled, a scale that would give Scania more freedom to balance output between continents as trade winds shift. Executives say the Rugao hub will share common architectures with plants elsewhere to allow engines, axles, cabs and software to be mixed and matched — a “Lego-like” approach intended to cut costs and speed variants into niche applications from mining to long-haul logistics.

The geopolitical backdrop is complicated. Europe and the United States have tightened trade and investment scrutiny, while China has responded with its own measures and a push for self-reliance in strategic sectors. Within the truck industry, Western players have taken divergent paths: some have pared back manufacturing exposure in China, citing thin margins and fierce price competition, even as domestic groups scale up and electrify. Scania’s wager goes the other way, backed by the conviction that premium demand in China will grow and that exports from a Chinese base can be competitive in nearby markets.

A sustainability pitch underpins the factory’s design. Scania says Rugao is being built to operate with net-zero CO₂ emissions, with on‑site renewables, energy‑efficient paint and heat‑treatment processes, and supplier programs to reduce embedded carbon in steel and components. The company has also created a local R&D unit to feed lessons from Chinese suppliers and customers into its global engineering network — a two‑way flow intended to accelerate decarbonisation and digital services across the Traton group.

The Chinese heavy‑truck market — roughly 900,000 units last year according to the industry association CAAM — has cooled since its 2020 peak as the economy slows and fleets upgrade from diesel to liquefied natural gas (LNG) in some segments. Scania is targeting higher‑spec transport where total cost of ownership matters more than sticker price. The first Rugao model will use an internal combustion engine, with the platform engineered to accept battery packs as charging networks and duty cycles allow.

Flexibility is the watchword. Levin and his team have designed the Rugao line to switch between powertrains and to swing output toward export orders when domestic demand softens. That versatility is also meant to reduce geopolitical risk: if tariffs or licensing rules change, Scania can re‑route production between Europe, Brazil and China without redesigning trucks from scratch. The company argues that such optionality is a strategic asset in a more fractious trading system.

The export plan leans on trade math. China has stitched together a web of regional agreements that, in many cases, lower duties for vehicles and components shipped to Southeast Asia and parts of Oceania. Levin said Scania will take advantage of any opens routes that enable competitive landed costs, while continuing to localise components to meet origin rules. Analysts note that regulatory treatment for heavy trucks differs by market and can swing with domestic politics, making a diversified destination mix prudent.

For China, Scania offers a showcase for high‑efficiency, high‑quality manufacturing in a sector still dominated by state groups. Local officials have urged the company to ramp quickly to full capacity, seeing Rugao as a reference point for process and energy efficiency in commercial‑vehicle production. The project underscores how Beijing still courts foreign investment in targeted areas where it sees knowledge transfer as a catalyst.

The risks are plain. Exporters from China face heightened scrutiny and, in some cases, tariffs as Western governments probe industrial subsidies. Currency swings could also reshape cost advantages, and component shortages — from batteries to critical electronics — remain a recurring headache. For Scania, delivery reliability, dealer networks and residual values will decide whether China‑built trucks can win repeat customers outside the country.

On the factory floor, Scania is transplanting its modular production system, including advanced welding, automated cab painting and in‑line software flashing that lets teams configure electronic control units to order. The approach supports a wide range of wheelbases, axle configurations and cabs without tearing up the line. In connected services, Rugao‑built trucks will ship with telematics that feed predictive maintenance and route‑planning tools, aiming to improve uptime and fuel efficiency for operators.

The company is also weighing when — not if — to scale electrification. Chinese battery suppliers, led by giants such as CATL, are pushing costs down and energy density up, and policymakers have signalled that heavy vehicles will face tighter emissions standards as early as next year. Levin said Scania will not “bet the factory” on a single energy solution until it is clearer which technologies will dominate long‑haul, but the architecture is ready for both battery‑electric and renewable‑fuel engines.

Industry rivals are watching closely. If Scania proves it can profitably export premium heavy trucks from China without diluting brand perception, pressure will rise on competitors to re‑evaluate their own footprints. If, however, political headwinds or pricing battles erode margins, the Rugao project could become a cautionary tale about the limits of globalisation in an era of economic security.

For now, the message to suppliers and dealers is straightforward: prepare for a new, third anchor of Scania’s manufacturing network. Early production slots in late 2025 will prioritise markets with homologation already aligned to Scania’s global specs, with broader roll‑outs planned through 2026 as certification and after‑sales support scale up. Executives say they will steer clear of markets where local partners would be undercut, focusing instead on corridors where Rugao’s logistics and trade ties offer genuine landed‑cost advantages.

If the bet pays off, Scania will emerge from the decade with a more balanced industrial base and a deeper pipeline in the fastest‑growing trucking regions. If it stumbles, the company still retains two other pillars — Europe and Brazil — to absorb volatility. Either way, the opening of Rugao marks one of the clearest tests yet of whether a Western heavy‑vehicle champion can use China as both a home market and an export springboard at scale.

Sources:

• Financial Times — “Scania to export half of trucks built at €2bn China plant,” Aug. 12, 2025. https://www.ft.com/content/34a6b501-57d8-4177-90ac-cdfe1f8dc8fc

• Reuters — “Scania readies €2bn China hub, eyeing Asian growth,” May 26, 2025. https://www.reuters.com/business/autos-transportation/scania-readies-2-bln-euro-china-hub-eyeing-asian-growth-2025-05-26/

• Euronews — “Half of trucks produced at Scania’s €2bn China site will be exported,” Aug. 12, 2025. https://www.euronews.com/business/2025/08/12/half-of-trucks-produced-at-scanias-2bn-production-site-in-china-will-be-exported

• Truck & Bus Builder — “Scania to open global production hub in China,” June 25, 2025. https://truckandbusbuilder.com/article/2025/06/25/scania-to-open-global-production-hub-in-china

• Scania — Rugao factory sustainability profile, 2024 update. https://www.scania.com/asia/en/home/about-us/media/Sustainability/scania-unveils-latest-status-of-rugao-factory-at-ciie-2024.html