China’s heavy-duty truck industry never lacks newcomers with great courage. Take as examples well known automaker Youngman Automobile Group, Dayun Auto, which started out producing motorcycles, and C&C Trucks, which is backed by the C&C gold industry line. However, as the overall market is shrinking, industry newcomers are keeping a low profile ahead of an uncertain future.
Youngman-MAN: an embarrassing position
Youngman Automobile Group started its cooperation with MAN Truck in August 2006 by assembling MAN branded trucks in China. Although the truck project at Youngman Group’s headquarters in Jinhua, Zhejiang Province remained non-profitable, the joint venture started to mass produce trucks in Shi Zuishan, Ningxia in July 2011 with a production capacity of 15,000 units.
According to an industry expert who prefers to stay anonymous, it is hard for Youngman to truly develop truck production ability by simply assembling MAN branded trucks. With its Shi Zuishan project outsourcing most of its auto parts, Youngman has not established a solid foundation for heavy-duty segment, said the person.
The commercial vehicle sector of Youngman-MAN has been backed by the bus segment, with truck business staying in a rather embarrassing position. As MAN started to cooperate with China National Heavy-Duty Truck Co., (CNHTC), the heavy-duty project with Youngman has faded away in MAN’s business prospect.
Pang Qingnian, president of Youngman Automobile Group, talked about the company’s truck business during a media interview. According to Pang, the Jinhua plant will reach a production capacity of 30,000 trucks next year with 8,000 already produced this year. Both Guizhou and Ningxia plants have been purchased from other companies with a production capacity of 5,000 and 10,000 units respectively. The question is: how would the shrinking market digest the above production capacities?
Dayun Auto: sacrifice profits to make heavy-duty trucks
Dayun heavy-duty truck is the third largest project of Dayun Auto next to its motorcycle and real estate projects, and also the key project of Yuan Qinshan, head of Dayun heavy-duty truck business.
The “Dayun No. 1” heavy-duty truck rolled off the production line on September 25, 2009, and the company invested ¥150 million ($24 million) for advertisement in 2010. Dayun Auto has kept its heavy-duty truck business operational by investing funds from its motorcycle and real estate profits.
According to Yuan, the ¥2 billion profits of Dayun Auto and the ¥100 million profits of real estate have all been poured into the company’s heavy-duty truck project. As a province with abundant coal and mining resources, Shanxi has around 40,000 heavy-duty trucks being registered every year. Although located in Shanxi with large demand, Dayun Auto is also confronted with many problems. These include competition from other Shanxi-based enterprises and the lack of channels and product varieties.
Dayun Auto should cut prices using its local advantages, and develop products of different segments tailored for local consumers, said an industry expert. After two years’ stagnancy in 2011 and 2012 which experienced an overall downturn of the heavy-duty truck industry, Dayun Auto posted sales increase of 49.8 percent to 7,100 units in the first half of 2013, and quashed rumors of Dayun Auto selling its heavy-duty truck business. “Although real estate deals can make more money than heavy-duty trucks, we will continue producing heavy-duty trucks and will invest all our resources to the heavy-duty truck sector,” said the president.
C&C Trucks: having a bad time
The principle of C&C Trucks is to make high-end heavy-duty trucks. However, it only reached annual sales of 3,000 units last year after the brand hit the market in December 2010. The Jirui C&C truck project officially started in March 2009, backed by China International Marine Containers (Group) Ltd. (CIMC), Chery Automobile Co., Ltd. Yuchai Group, Fast Group, and Fuhua Engineering Manufacturing Co., Ltd. As C&C Trucks signed a cooperation contract with Petro China, the shareholding relationship of the company became more complicated. During the past three years, C&C Trucks had a dozen of sales executives coming and going. It remains to be seen whether Liu Xiaobo, the new sales executive from Foton Auman, can boost sales of C&C Trucks
(Rewritten by Jennifer Chen based on author’s article in China Business Herald)