Futian Joins Cummins: "The Beauty of the Future" of Light Trucks

The dawn of Beijing is quiet.

On July 1, 2009, China's light truck industry will implement the National III emission standard and implement the new standard of “Limit of Fuel Consumption for Light Commercial Vehicles”. Although the competent authorities have not limited the technical choice of the State III light diesel vehicle products, the market competition situation has determined that the light truck manufacturers must make the right choices.

Correspondingly, in 2008 when the Chinese government stipulated that the heavy truck industry implemented the national III emission standards, it drove severe changes in the market. The manufacturers that focus on the engine become the real winners of the new market. With the development trend of China's commercial vehicle market, the competition in the light-duty truck industry is harder than this. The storm is coming.

On June 9, 2009, Foton Cummins officially started production of an annual production capacity of 400,000 engines, mainly producing ISF series 2.8-liter and 3.8-liter diesel engines. At the same time, the two parties also signed the "European V Product Technology Licensing Contract," and signed a memorandum of cooperation on the development of products with emission standards above Euro V. This indicates that the international strategy of “Global Engine World Power” formulated by Foton Motor (600166 sh.) has gradually taken shape. The fundamental changes in the field of commercial vehicles in China have entered a deeper level. "It is Cummins's successful tradition to maintain its leading position in technology, actively participate in international development, and provide solutions for companies facing new challenges," said Su Zhiqiang, Cummins Chairman and Chief Executive Officer. For Foton Motor, this is also true.

The financial tsunami that has swept the world has plunged the auto industry. Although the growth rate of the Chinese automobile market has slowed down to a certain extent compared with the previous period, there are few people in the world that are comparable to it. In this market, the growth of the passenger car market is much faster than that of commercial vehicles. According to analysis by the Research Department of the newspaper, changes in China's commercial vehicle market have basically kept pace with changes in GDP since the 1990s. In the first five months of 2009, the commercial vehicle market has seen negative growth. Among them, the change in the light truck market is relatively stable. Therefore, it is possible to stabilize the sales of light trucks under the current market conditions and become the top priority for major commercial vehicle manufacturers. "Fukuda is rushing ahead of its competitors for high-end light truck engines," commented Dongfeng Motor (600,006 sh.).

With the increase of industry emission standards, many commercial vehicle manufacturers have made painstaking efforts. Environmental issues were also placed in front of Foton Motor. The introduction of the Foton Cummins series engine has enhanced the foundation of Foton Motors. Thus, the beauty of technology and the future is defined as its brand philosophy. “We have to return the city to a blue sky,” said Wang Jinyu, general manager of Foton Motor.

"The beauty of the future"

The depressive economics of the automotive world are still deepening, and the performance of the commercial vehicle world is particularly prominent.

Since the financial tsunami in 2008 had a profound impact on the automotive industry, the Chinese commercial vehicle market has responded more sensitively. In fact, since 2000, China's commercial vehicle market has continued to show growth. However, in the first five months of 2009, this growth rate has obviously slowed down. However, the light truck market has a limited impact. At the same time, the light-card market has been relatively active in the commercial vehicle range, spurred by the central government’s automobile-to-country policy. "The truck-based manufacturers must ensure that they have an advantage in light trucks. The market for medium- and heavy-duty trucks has not shown any signs of recovery," said the executive of the JAC Commercial Vehicle Division.

At present, the top five manufacturers in the light truck market in China occupy close to 60% market share. Among them, Foton Motors holds 28% of the market, Dongfeng Motor's market share is 12%, Jianghuai Automobile, Jiangling Motors, and Kama Motors occupy nearly 20% of the market. In the past five years, the market has basically maintained this pattern. Any change in the market will cause changes in the market structure.

In terms of current market segments, JMC and Qingling light trucks using Japan’s Isuzu technology are at the high end, JAC’s and Dongfeng’s light trucks are at the mid-end, and Foton’s fleet of light trucks are at the low end. Although automakers are trying to expand the product's competitive range, this requires strong engine and chassis technology as the backing.

As the largest light truck manufacturer, Foton Motor has an overwhelming advantage in the market segment with its time series models. In the first five months of 2009, cumulative sales of light trucks totaled 198,800. Time Series products account for the vast majority of them. At the mid-to-high end, the Olling and Oumako products are in urgent need of new impetus.

The two major engines of Foton Cummins are the latest products jointly developed by the Cummins U.S. headquarters R&D center, the European R&D center, and the East Asia Research and Development Center in Wuhan. In the U.S. market, the Chrysler Dodge pickup series that matches this series of engines has always had an absolute advantage. This move by Foton can quickly increase the competitiveness of the Olling and Oumacker series of products. The joint venture plant, which was jointly invested by Futian Automobile and Cummins to invest RMB 2.7 billion, is the largest engine manufacturer in China.

After integrating advanced technologies to make up for the lack of core business light trucks, Foton Motor believes that the future of beauty should become its goal. This, to a certain extent, will enable it to form a dual-brand strategy for Foton Motors and Times Auto in light-duty truck business. In particular, Olling and Oumak products can be upgraded in time with the help of Cummins engines to expand the high-end light-card segment. This will change the pattern of China's high-end light truck market led by Isuzu Technology.

The weight of power

The competition in China's commercial vehicle market is to a certain extent the competition of the engine.

The world's major commercial vehicles and their major engine manufacturers have entered China. China Sinotruk, Weichai Power and Germany's Mann have established a joint venture, Dongfeng has established cooperation with Renault and Nissan, and FAW Group has established a foothold in German Deutz technology. They laid the tone for the development of the heavy truck market in China. Only the use of international advanced engine technology can be based on the market. At the same time, the higher China's degree of localization, the greater its competitiveness in the market.

As the largest commercial vehicle manufacturer in China, Foton Motor chose Daimler Benz as its partner. On August 8, 2008, Foton Motor signed a letter of intent with Daimler Benz to establish a joint venture company. At the same time, its business also extends to the field of passenger cars. According to the plan, in 2010, the medium and heavy trucks that match Mercedes-Benz's power will become a weapon for its market competition.

For Foton Motor, the joint venture with Mercedes-Benz is not included in the scope of the consolidated statement. This makes Foton Motors must focus more on light trucks and other businesses. This segment is also the main source of profit for Foton Motor. One year before the joint venture with Mercedes-Benz, the light truck business accounted for 53% of its total revenue and 56% of total profits. With the statistics for the first five months of 2009, the light truck business has become the pillar of Foton Motor. However, due to the fact that its products are mostly at the low end, the yield is relatively low. Matching the high-end light trucks such as the Eudemons of the Cummins series engine can change this situation.

More importantly, with Cummins technology, Foton Motor can enter the international market. In terms of light truck products, markets such as the United States, Mexico, Germany, France, Spain, Japan, and South Korea have dominated the market, and they are at the high end of the market. However, in these markets, the prices of products are relatively high. This is an opportunity for the export of China's light truck series products.

In China's commercial vehicle market, Foton Motor will soon have an annual production capacity of 1 million engines, covering almost every segment of the commercial vehicle market. This has led to a new pattern in the entire commercial vehicle market. As far as light trucks are concerned, Dongfeng Motor, which is second in the market, has yet to make full use of the resources of Nissan and Nissan Diesel. JAC is constrained by the sedan project and it is difficult to expand in a short time. Sales of Jiangling and Qingling have been plagued by their expansion of the market. As a result, Foton Motor will become the largest producer in this segment.

In addition, after the Chinese government has established a plan for energy conservation and emission reduction, whether or not it has advanced engine technology will become a new market standard. The improvement of the technical threshold has increased the competition standards of various automakers.

When the financial tsunami changes the pattern of the world’s automobiles, the Chinese commercial vehicle market will also change. It will only lag slightly behind the international market in terms of time, but this will not change the decisive role of engine technology in it.