Dongfeng Commercial Vehicle Company (Dongfeng Commercial) held a groundbreaking ceremony for its new heavy-duty truck plant at Shiyan, Hubei Province, on May 23. When it rolls into production, this plant with a designed annual capacity of 80,000 units will become Dongfeng Commercial’s largest heavy-duty truck manufacturing base in China, and the truck maker will be able to increase its output capacity to some 200,000 units a year. The company’s newly appointed general manager Huang Gang was interviewed during the ceremony by Auto Weekly. The following are the highlights of the interview – Editor
Auto Weekly: Dongfeng Commercial has attached great importance to the ceremony, by inviting Luo Qingquan, provincial Party-secretary of Hubei Province, and Miao Wei, vice director of the Ministry of Industry and Information Technology (MIIT). What is the significance of the second factory for Dongfeng Commercial?
Huang: We’re launching the new plant next June to solve two issues. First, it can relieve some of the production capacity pressures on our other plants. On top of that, the project is essential to providing production back-up that can enable Dongfeng Commercial to realize its long-term goal of being “No. 1 in China and No. 3 in the world.”
At present, the shortage of production capacity is our main weakness. Since the beginning of the year, Dongfeng Commercial has been struggling to catch up with orders. We have sold 111,000 vehicles in the first four months this year, up 138 percent year-on-year. Sales of trucks were 94,700 units, up 160 percent, with growth way higher than the industry average at 90 percent. Our market share also increased 5 percentage points compared with last year. Until the end of April we sold 34,700 units of our high-end product, Kinland heavy-duty trucks, four times the number last year. However, our records have shown that in March and April, for every Kinland truck on the assembly line, there were two clients waiting. Although we already renovated one of our heavy-duty truck production lines at the end of 2008 during the financial crisis, sales in the first four months of the year still leapt beyond our predictions.
Considering that sales of the Kinland series vehicles grew from less than 2,000 units in 2006 to over 10,000 units each month this March and April, the originally designed production capacity for the model is very short. Starting a second plant in Shiyan is a response to the growing domestic heavy-duty truck market.
Auto Weekly: What is the detailed sketch for the new plant?
Huang: We are funneling a total of ¥1 billion ($147 million) on the project. The new factory, with a total area of two square kilometers, is expected to manufacture 80,000 units at its peak. The first phase, designed to reach a capacity of 40,000 units, will be in operation by June 2011. The plant will focus on the production of the Dongfeng Kinland and new heavy-duty truck products to be released in the future. Once completed, the new plant, designed to meet all international standards, will cover different stages of production, from vehicle assembling and testing to storage and transportation.
As I mentioned, the production of the Kinland trucks will be switched to the new plant. The Kinland is our brand of medium to high-end trucks, currently running under State III emission standards. Once the new emission policies are implemented next year, the key models for the Kinland series will be upgraded to State IV trucks. There will also be new Kinland models produced, as we continue to emphasize technological innovation. The new factory is also eventually scheduled to launch heavy-duty truck products for the international market.
Auto Weekly: Could you talk about the “N+3” concept?
Huang: The “N+3” concept is Dongfeng Commercial’s strategy of working through the global economic recession. “N” represents a certain period of time, and “3” stands for the three months, three quarters or three years after the period. Our present decision-making should reflect serious consideration of market trends and demand change in the future. Dongfeng Commercial started innovation projects of our production lines at the end of 2008, when the market was greatly hit by the financial crisis, which was the main reason we implemented the “N+3” concept. The new plant is yet another manifestation of our concept.
Auto Weekly: What is your vision for the heavy-duty market this year and in the future?
Huang: Our sales figures show significantly fewer orders in May. The two months of March and April should be the peak for sales in 2010. Sales from the first half of this year may take up around 60-70 percent of the yearly total. Considering seasonal variations in the heavy-duty truck market, we are expecting the market to be more static starting in July. Generally, the heavy-duty truck market will see slower growth in the second half. However, total sales should surpass last year’s record to be around a million units.
In the long run, a developing country like China will see steady growth in its macro-economy. As a result, the demand for heavy-duty trucks should beckon a similarly steady increase. And the global market will eventually shake off the financial crisis. With technological innovation and quality improvements, Chinese-made heavy-duty trucks will get better results on the international stage.