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Newcomers in the heavy-duty truck market: mixed performance

The record-setting year for China’s heavy-duty truck market in 2010, in which sales surpassed 1 million units, brought an investment boom to the sector.

XCMG Group, Dayun Auto, C&C Trucks and Yutong Group are the major newcomers to the sector. Some of them have already become a top 10 player and some have recently finally launched products. But many of them have not started production at all.

Newly launched: XCMG

XCMG, a leading engineering machinery manufacturer, began production of its Hanvan heavy-duty trucks on March 18, 2015 and launched the model the same day.

A new player in the heavy-duty truck industry, XCMG has grown rapidly in recently years, earning ¥2 billion ($324 million) in 2014 and becoming the market leader in wide-body dump trucks.

Located in the High-Tech Industrial Development Zone of Xuzhou, Jiangsu Province, XCMG’s heavy-duty truck production base occupies a space of 922,683 square meters with annual capacity of 60,000 trucks and 40,000 construction machinery cabs. XCMG claims that with an investment of ¥2.5 billion, the base marks the highest level of manufacturing technique for commercial vehicles in China.

XCMG plans to cultivate Hanvan as a major heavy-duty truck nameplate in 3-5 years, according to Luo Donghai, president of XCMG Motor.

XCMG Motor has developed 68 State-IV emissions standards-compliant models equipped with Weichai, Shanghai Diesel or Cummins engines. The company currently owns nearly 300 types of vehicles covering medium- and heavy-duty trucks and non-road dump trucks that comply with State-III, IV and V emissions standards. Its product range includes natural gas trailers, natural gas special-purpose vehicle chassis, and LNG mixers. Engineering truck products cover city construction vehicles, sanitary vehicles, coalmine vehicles and special-purpose vehicles. 

“Although competition is intensifying, there will always be opportunities for aggressive and well-prepared players,” Wang Min, chairman of XCMG Group, was quoted as saying by the media.

Best performer: Dayun

Dayun Motor sold 16,000 heavy-duty trucks in 2014, up over 30 percent on a yearly basis and ranking 9th in sales among major heavy-duty truck makers. It earned a profit of over ¥100 million and was the only newcomer that achieved mass production.

“The company wasn’t able to achieve its 50 percent growth target last year,” said Yuan Qinshan, chairman of Dayun Motor, in a recent interview with find800.cn. “The market is more difficult than we thought.”

The lack of dealer footprint and financing services for customers were the main obstacles the company confronted.

“As a new brand, our dealer network is far less advanced than that of leading truck manufacturers,” said Yuan. “Dayun has not provided enough auto financing support to its customers. Unlike FAW Jiefang and Dongfeng, which have financing companies of their own, Dayun is not able to provide good financing solutions for customers.”

But Yuan still believes Dayun’s prospects are promising. The company lost ¥200 million annually during initial stages of development but earned about ¥20 million in 2013 for the first time. After earning over ¥100 million in profit last year, both the company and dealers are optimistic of the future.

The major task for Dayun is to expand its dealer network in 2015 as it plans to sell 20,000 units in the year. Dayun aims to achieve ¥500 million in profit in three years and be listed in the main board then.

According to Yuan, there are five stages of developing a business. First is to make products with good quality; second is to expand sales networks; third is to build the brand; fourth is to establish product chain and gain profit for suppliers and dealers, and the final stage is to invest in R&D and develop better products.

“Dayun is currently in the fourth stage and also carries on works of the first three stages,” said Yuan. “We will make steep investment in R&D after sales reaches 100,000 units annually.”

According to Yuan, Dayun is not making large investment in R&D at present. On the one hand, the product developed may not fit customer demand. On the other, the cost of unit product will be extremely high due to small production volume. “Quality is the key for newcomers. Dayun will invest in R&D after being listed in the mainboard. We will earn good money by then,” said Yuan.

Different from other truck makers, Dayun will not self-develop engines or transmissions. “We should only do things we are good at. Dayun and engine suppliers can cross-hold each other’s shares. Making money is the premise and one should never act rashly,” emphasized Yuan.

Shattered high-end truck dream: C&C Trucks

C&C Trucks was essentially born out of the heavy-duty truck market boom in 2009 and 2010. When its first truck was launched in December 2010 for nearly ¥700,000 ($112,903), it was a bold move as most domestic heavy-duty trucks cost less than half as much.

However C&C Trucks started to adopt a diversified competition strategy instead of competing directly with its rivals on costs and prices in 2012. The company would keep on targeting the high-end truck segment, with LNG, lightweight and fuel economy as three key focuses.

But in actuality, C&C Trucks did not sell a single high-end truck in 2011. It only sold normal products at market prices.

According to C&C Trucks, there is a void in the Chinese market for heavy-duty trucks with prices of ¥400,000-¥800,000, and the goal of C&C Trucks is to fill that void. However, neither the products nor the service of the newborn C&C Trucks can compete with foreign brands such as Mercedes-Benz, Volvo, MAN and Scania.

It is impossible for domestic truck makers to enter into the high-end threshold in a five-year timeframe, and most trucks sold will still be mid- and low-end products.

Put aside the high-end truck dream, C&C Trucks has been doing good in its own level.

At its 2015 business conference held on January 30, the company announced that it sold 7,021 trucks in 2014, up around 40 percent from 2013, with valid orders totaling 8,072 units. About two-thirds of the trucks sold were diesel trucks and the remaining third were natural gas trucks. The company kept on expanding international markets such as Vietnam and Algeria, and exported 872 trucks.

C&C Trucks plans to sell 12,000 trucks in 2015, up over 70 percent. Sales will include 4,800 natural gas trucks and 7,200 diesel trucks. Trailers are estimated to account for 55 percent of total sales, while self-dumpers, mixers and other types of vehicles will take up 13, 21 and 11 percent respectively.

C&C Trucks plans to increase sales by 50 percent annually in the next five years and enter into the second camp of leading heavy-duty truck makers in 2017. The company also wants to lead the second camp by 2020 through an annual growth rate of 30 percent.

New product next year: JMC

Jiangling Motors Corp. (JMC) announced on February 11 that it plans to invest ¥1.173 billion ($187.68 million) in initial investment for the J20 heavy-duty truck project.

Originating from the Ford heavy-duty standardized driving cabin project, the J20 truck will be equipped with Ford chassis and engine technology. JMC plans to develop or introduce relevant whole vehicle products of Ford to improve the company’s competitiveness in the heavy-duty truck market. The initial investment will be applied towards relevant engineering development expenses and purchase of equipment and molds.

Under preparation: Yutong

Yutong Group, one of China’s leading bus manufacturers, claimed back in January 2011 that it would expand its business into heavy-duty trucks and other commercial vehicles.

According to posted job vacancies for the newly established heavy-duty truck and commercial vehicle divisions on its official website on January 3, 2011, senior management, technology, manufacturing technique, supply chain, marketing and general management were the six main categories covered by these two new divisions.

However there has not been much progress since then. Buses and construction machineries are the only two businesses in Yutong’s service scope. With the falling heavy-duty truck market and tougher entrance thresholds, can Yutong still realize its heavy-duty truck dream?

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