Daimler, Chinese Firm Gain OK For Truck-Making Joint Venture

Daimler AG and a large Chinese truck maker have received Chinese government approval for their joint venture to build medium- and heavy-duty trucks and engines for the domestic market and for export.

Some analysts said this move could be a key step in a global realignment of the truck-making industry that would eventually bring imported, lower-priced, heavy-duty trucks to North America.

Daimler and Beiqi Foton Motor Co. Ltd. both announced Sept. 26 that the Chinese government had given final approval for their 50-50 joint venture.

Earlier that month, Foton showed off its new heavy-duty cabover tractor, the Auman GTL, which it said it spent $266 million to develop in order to sell in North America, Europe and Japan.

Daimler said it had no involvement in the design or building of the Auman GTL, which was launched before the joint venture was approved. However, officials said Daimler did provide an MB4000 series engine for Foton engineers as part of the model’s design work.

“With our 50% stake in Beijing Foton Daimler Automotive, we are further strengthening our position as an important player in the China market,” Dieter Zetsche, chairman of the Board of Management of Daimler and head of Mercedes-Benz Cars, said in the statement.

“This is an important step for the global growth strategy of Daimler, as well as the local expansion of our portfolio,” Zetsche added.

The Chinese government limits foreign truck makers to one joint venture; Daimler’s last partnership with a Chinese producer was not successful.

The Daimler statement said that 1.2 million trucks of 6 tons gross vehicle weight and larger were built in China in 2010, and that figure was expected to grow to 1.5 million annually by 2020.

According to the government-controlled China Daily newspaper, Foton is the largest commercial vehicle maker in that country, and produced some 693,000 vehicles in 2010.

“Both partners will use Foton’s truck brand, Auman, as a platform to grow business in China and look at cooperation opportunities outside of China,” Wang Jingyu, CEO and president of Foton Motor, said in the statement.

“In addition to making use of our sales and service network for the medium- and heavy-duty truck sector, Foton Motor will also contribute its market know-how in China and the rest of Asia to the joint venture,” Wang added.

Daimler confirmed that the joint partnership would aim to sell lower-cost trucks outside China, without identifying any countries.

“This joint venture will be well-positioned for growth, profitability and scale, not only in China, but in international markets as well,” Daimler spokesman Heinz Gottwick told Transport Topics.

“The joint venture will benefit from Daimler’s technology leadership — specifically Mercedes-Benz heavy-duty engine and aftertreatment technology — and use Foton’s Auman brand as a platform for growth in the lower end to midrange commercial vehicle segment,” Gottwick added.

Analysts said that if Foton or another company got the technology and costs right, they would find a market for their products in North America.

“It’s not a matter of how, it’s a matter of when low-cost Asian trucks will hit our shores,” Sandeep Kar, global director of commercial vehicle research at consulting firm Frost & Sullivan, Toronto, told TT.

If Foton does export to North America, “Initially, I think they will offer day cabs only, mainly for certain vocations such as pickup-and-delivery in urban markets on routes of 100 miles a day and less,” Kar said.

He explained that the GTL’s current cabover configuration also would restrict it to local markets.

“Longhaul freight absolutely won’t be part of the plan initially,” Kar added. “But many fleets are struggling with the high costs of North American trucks, and if Beiqi Foton and other companies can offer trucks 20% to 30% cheaper, that could bring tectonic shifts to the market.”

Kar said that the GTL may not be the truck that finally comes to America, but that one could come from the Daimler-Foton partnership.

“Many truck manufacturers are studying ways to lower the costs of their products,” Kar said. “Globally, what Daimler is doing is a very smart play when the economies are in a state of flux, and a number of fleets are demanding lower-cost trucks.”

Kar added that Daimler’s earlier agreement to build trucks in India for that country’s market gave Daimler another way to develop lower-cost technology that eventually could be used in North America, Europe and Japan.

“Absolutely, there is a market for a lower-cost truck,” Chris Brady, president of Commercial Motor Vehicle Consulting, Manhasset, N.Y., told TT. “I think this truck should tell all the [truck makers] that they need to focus not just on drivers and creature comforts, but with prices of trucks getting higher, they need to think how they can take cost out of truck.”

Brady added that he didn’t think the Auman GTL truck would be “a slam dunk right away, just because of a lower price.”

As with Kar, he said Beiqi Foton would initially “pick a market segment, such as a cabover for day-cab operations.”

“As these companies expand beyond their home markets, I think we’ll see more Chinese heavy-duty trucks, we’ll see an Indian one and we’ll probably see a European one — a combination of Volkswagen, MAN and Scania — as long term trends,” Brady said.

John Zeng, director of J.D. Power Asia Pacific Forecasting, based in Shanghai, China, recently saw the GTL.

“We have just come from a workshop with Foton, where they showed this new truck,” Zeng told TT.

“During the first years, they will be rolling the new truck out for the Chinese market only,” Zeng added.

He said that Foton could have claimed that it built a truck “to meet U.S. and European standards with high technology, so that it’s easier to sell in China.”

“It will take quite a long time to set up a dealer network in Western Europe, and it will be even tougher to sell Fotons in Western Europe after that,” Zeng said. “The Chinese style of truck is completely different than the U.S. market. Foton won’t even be able to touch the U.S. market.”