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Together with partner Foton, Daimler looks to expand truck business in China

HANNOVER, Germany – The fact that the Auman 430 EST super truck from Daimler’s joint venture with Foton was the only Chinese truck on display at the entire IAA Commercial Vehicles in September and part of the “Trucks and Buses for the World” showcase at Daimler’s stand reflects the importance of the Chinese market for the world’s biggest truck and bus manufacturer.

“The Chinese truck market is one of the biggest truck markets in the world if not the biggest,” said Dr. Wolfgang Bernhard, member of the board of management of Daimler AG responsible for Daimler Trucks and Buses, in an interview with CBU/CAR on the sidelines of the biennial show on September 22. “We are opening all of our technologies and knowhow to improve our JV and we are on our way to bringing vehicles that better meet Chinese market demands.”

The Auman 430 EST, which made its global premiere, is one of those vehicles. It is currently being optimized before its market launch in China next year, according to Bernhard, and development for the next generation of the Auman due out in 2019 has already begun. The Auman EST is equipped with a 12L Euro-V Mercedes-Benz OM 457 engine, achieving fuel savings of up to 5 percent compared with its predecessor in conjunction with the cutting-edge ZF Traxon transmission. That engine is being produced at an engine plant on the premise of Beijing Foton-Daimler Automotive Ltd. (BFDA), and will be ready for the upcoming China VI emissions standards in a few years’ time.

“We are working hard together to improve the quality of components as well for the whole truck,” said Bernhard, underscoring the importance of BFDA for Daimler Trucks and Buses in China.

“BFDA is important for both partners,” said Zhou Liang, president and CEO of BFDA and senior executive VP of Daimler Greater China Ltd. “Daimler has already decided to bring more technology to support this company to be successful in the future. Foton will also provide big contribution to the company as well.”

Bernhard added that Daimler has a very open, constructive and trustful relationship with Foton. “Everything we discover somewhere around the world, Europe, China, Japan and U.S. is being shared openly and constructively,” said Bernhard. “Whatever we find that might help us to make us stronger in China we will have in China. We are open to share all kinds of technologies as long as the customer in China is willing to take it.”

Zhou pointed out that China’s new normal is causing customer behavior changes and the economic environment is also changing, which means customers have higher requirements on trucks and that will push BFDA to produce better products to meet those requirements. “Right now is exactly the right time. We will bring more new technologies into this market to meet this requirement. Our new product in 2019 will be very competitive,” said Zhou.

In parallel, on the Mercedes-Benz side, Daimler Trucks imports a couple thousand vehicles a year primarily in construction but demand for long distance trucking is increasing.

“Daimler is in the leading position in the import segment. Our overall market share is considerably higher,” said Dr. Rainer Gaertner, president and CEO of Daimler Trucks and Buses China. “We see a shift away from construction to long haul and express cargo delivery. It is a very interesting market and business going forward. We are upgrading our products to meet the new emissions standards (Euro V) and we will surely add new series of products.”

All three senior executives believe that Daimler will benefit from the fact that Chinese customers today are increasingly focused on the total cost of ownership of a truck rather than upfront pricing, and recent introduction of the GB1589 standards on dimensions, weights and axle loads of commercial vehicles will lead to demand for more sophisticated trucks.

“At this time, the products are fairly unsophisticated and simple. But this will change,” said Bernhard. “In the past our customers have much focus on the purchasing price for the truck. They start to increasingly understand that price is only part of the total cost of a truck over its complete life. On top of purchasing price, very important is fuel consumption. Second is reliability. A truck that breaks down a lot and is not reliable cost a lot of spare parts. During the time the truck does not run, it cannot earn money. Our customers in China start to understand that total cost of ownership and fuel efficiency is a very important factor to put into their economic calculation.”

It is Daimler’s intent to offer Chinese customers the right tradeoff between content and price, according to Bernhard. “We don’t want to overprice the vehicle and put too much price on it that the customer cannot afford it,” said Bernhard. “On the other hand, the vehicle must fulfill the requirements the customer really needs. We have to strike the right balance, on the one hand to get enough content and the vehicle serves the purpose but on the other hand, the truck needs to be affordable and the customers are able to finance the vehicle.”

Bernhard expects that in the next couple of years, segments within the truck market will shift as regulations on emissions, CO2, noise and safety become much stricter. One of those is the aforementioned GB1589 and Daimler fully supports it.

“We highly appreciate that these new regulations are now enforced. That brings more safety on the roads,” said Gaertner. We see many overloaded vehicles, many vehicles with excess dimensions, and those vehicles are not necessarily increasing safety. We are happy to see that the government is really taking a tough stance on cutting off this bad habit, we can fully support it with our European product range because new regulations are moving more and more toward the direction of European regulations which is to our favor.”

Zhou echoed Gaertner’s comments and believes BFDA is well prepared. “It will have a big impact on the truck business. The GVW will be reduced and different dimensions will be reduced. It will push all OEMs to produce trucks with higher technology, lower fuel consumption to give customer more chance to use high tech vehicles,” said Zhou. “We will support this new regulation.”

Bernhard believes that these adjustments are necessary and they will bring everybody down to base and Daimler will be on a much more solid ground with the market. “I would rather have continuous growth than up and down all the time,” said Bernhard.

He predicts that in the future China will never see one million heavy-duty trucks sold in a year (in 2010) again and in the long run the market could be between 500,000 and 700,000 units. “The reason for that is there will be a shift from investment to private consumption. Within the transportation system there is much efficiency to be had. Many areas of China logistics work like taxis – we call, he drives, gets up and puts the goods from A to B, and home again with many empty runs,” said Bernhard. “We believe as the fleets grow, the methods of logistics will be sophisticated, the empty runs will go down considerably. Transportation will be much more efficient in the future with our help and it is our intention to offer convincing products – the Auman and Mercedes vehicles. We are working hard to get the right ingredients so we can over time build and grow market share in China. Our expectation is moderate growth and also growth in market share.”

When asked when he would actually see pure electric heavy-duty trucks on the roads, Bernhard predicted that electric trucks only for city use, not for long haul distribution, will commercialized by 2020 as prices of batteries continue to go down and performance and strength continue to improve.

“In the year 2020 we believe those batteries will be so strong enough to power a heavy-duty truck,” said Bernhard. The Urban eTruck unveiled by Daimler at IAA is equipped with a 2.5-ton battery that is able to power a truck for 200 km without recharging, a range that Bernhard believes is more than sufficient for distributing goods within the city and thereby reduces emissions and noise.

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