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Export helps CNHTC balance its books

The following interview with the chairman of China National Heavy-Duty Truck Corp. (CNHTC) was recently published by Liaowang Dongfang Zhoukan or Oriental Outlook, a weekly magazine run by the official Xinhua News Agency. CNHTC originated from the Jinan Automobile Works founded in 1956 and was reorganized into China Heavy-Duty Automobile Group Corp. in 1990. The current company was the result of another reorganization in 2001 when the assets were transferred from the central to the Shandong provincial government. The following is an abridged version of the interview. – Editor

Oriental Outlook (hereinafter referred to Outlook): Is it true that despite the drastic slowdown of the HD market in the past two years, CNHTC still ended 2012 with a profit?

Ma Chunji (hereinafter referred to as Ma): The bottom line is that we did not run a loss. Supported by strong export demand, we sold 109,000 vehicles in 2012 and realized sales revenue of ¥56 billion ($9.1 billion) and a profit before tax of over ¥2 billion. We exported 26,500 trucks in 2012, up 30 percent. CNHTC has been China’s leader in exports for eight consecutive years.

Outlook: China’s total heavy-duty truck export in 2011 was up around 30 percent.

Ma: CNHTC’s export in 2011 grew by 50 percent, with a total of over 20,000 units. In Brazil, for example, CNHTC signed a breakthrough deal to export 2,000 Euro V-compliant trucks. We also agreed with our Brazil partner to build an assembly plant to make CNHTC brand trucks. We are able to compete directly with multinational brands in Brazil.

Outlook: How would you compare your achievement with leading multinational truck makers?

Ma: As far as I know, output and sales of each of the leading multinational heavy-duty manufacturers such as Benz, Volvo and MAN trucks in 2012 were around 100,000 units. In comparison CNHTC did fairly well exporting more than one-fourth of our trucks. Of course Chinese HD manufacturers, including CNHTC, are obviously behind the world heavy weights.

Outlook: Why was the Brazil development so important?

Ma: It is a life and death issue for a manufacturer to be able to sell own-branded trucks. First, you need to pay a license fee to use foreign brands, about 5 percent of sales. Secondly, you are limited in production and sales, including export. Now that we own our intellectual property rights and branding, we can sell in the international markets and that helped us tide over the drastic declining domestic market.

Outlook: What explains CNHTC’s market leadership in export as other domestic HD makers also have independent branding and intellectual property rights?

Ma: Our unique market position was made possible through an equity exchange with MAN Corp. which purchased 25 percent plus 1 share of Sinotruk stocks listed in Hong Kong. The deal made it possible for MAN to share its manufacturing technology with CNHTC. This is different from the old technology transfer where the licensee was given only product blueprints and manufacturing equipment. Our equity tie-up with MAN ensures that we also get to know what is behind the blueprints, detailed manufacturing processes and how to test the products to ensure quality.  

Outlook: How does this unique relationship help CNHTC?

Ma: We are the majority shareholder and it is natural that we can use our branding. The technology also becomes ours after we incorporate MAN technology into our own R&D. This helps us raise the technology competitiveness of our products in the global markets. If we continued making foreign-branded trucks in the case of a joint venture, we would never have been able to independently export our vehicles.

Outlook: Why did such a unique relationship not happen earlier?

Ma: Chinese truck makers and the government have long been trying to do so but for a long time we were too weak and the China market was too small. When China opened its doors for overseas cooperation, it did not have the technology to make heavy-duty trucks. The Big Eight heavy-duty manufacturers were not interested in us and we had no alternative but to work with Steyr of Austria, the smallest player, for a technology transfer agreement. Up until 2007, all the big players had demanded that we assemble their brands in China. But their attitude started to change after 2007 when annual sales of HD trucks reached 490,000, matching numbers from Europe and North America. Multinationals became less demanding and domineering at the negotiation table and agreed to consider allowing the Chinese partners to make their own brands in a joint venture deal. This attitude change was also due to their weakened market positions because of the global economic crisis.

Outlook: Is Sinotruk now an internationally known brand?

Ma: Not yet. We are still some distance away. Internally we have Chinese manufacturers trying to export Sinotruk vehicles without our authorization. They try to make a quick profit through sales but fail to offer adequate aftersales service, which ruins our brand. Externally we are constrained in our export to certain countries because of hegemonic economic embargos in some cases, and market protectionism in others.

(Rewritten by Wayne Xing based on author’s article in Liaowang Dongfang Zhoukan or Oriental Outlook)

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