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Truck makers pin hopes on urbanization amid slump

2013-11-11 11:05 China Daily Web Editor: qindexing
Foton performs well in heavy-duty trucks despite a slowing growth in the market. [Provided to China Daily]

Foton performs well in heavy-duty trucks despite a slowing growth in the market. [Provided to China Daily]

Industry analysts say prospects for Chinese truck manufacturers overseas still look grim because of high barriers to entry in mature markets like Europe and the United States coupled with a saturation of Chinese brands in traditional export destinations like the Middle East and South Africa.

But these truck makers have found a silver lining in China's latest efforts to push forward urbanization.

Heavy-duty trucks are always needed at the growing number of construction sites around the nation. People from the countryside in central and western China are expected to swarm into small cities, creating a large demand for infrastructure and the tools to build it.

Figures from China's National Bureau of Statistics show that the nation's urban population increased by 12 percent between 2002 and 2011. It is now increasing by 20 million every year, according to the Ministry of Housing and Urban-Rural Development.

According to China ministry's institute on industrial research, heavy-duty truck deliveries grew by 12 percent year on year during the first eight months to 503,100.

Beiqi Foton Motor Co, the largest commercial vehicle manufacturer in China by sales, is among those eager to capitalize on this opportunity. During the first eight months, Foton sold 73,900 heavy trucks, up 27 percent from a year ago.

Zhao Jingguang, vice-president of Foton, said the heavy truck segment as well as the entire commercial vehicle market may make fortunes out of this urbanization drive for a considerable period of time.

"Last year, the commercial vehicle industry was hit hard by the bad economy, but this year, the industry is showing signs of a slow recovery thanks to various stimulations, including the government's urbanization drive," he said.

A report from China Galaxy Securities found that the rebound of the truck industry and government procurements of new-energy vehicles will be two major driving forces for Foton this year.

In addition to heavy-duty trucks, Foton is also a major manufacturer of electric buses in China.

To cater to the new demands, Foton needs to attach more importance to the emerging markets, Zhao said.

"We need different designs and tests due to different climates," he explained.

"We have to adjust the height of chassis and volume of oil tanks to fit into various terrains in different areas."

It is also testing its vehicles with non-conventional ways, such as bidding to be the cargo supply vehicles for the South Pole expeditions.

"It is a good opportunity to test the performances of the vehicles in an extreme environment, so we can use the feedback to pave way for entering some overseas markets with extreme weather, such as Russia," Zhao said.

Dong Yang, deputy secretary-general of the China Association of Automobile Manufacturers, said the commercial vehicle market may get a boost from this round of urbanization, although it may take some time.

"The market may not be as bullish as in 2008 and 2009, but the truck market is returning to mild growth," Dong said.

Wu Yuejun, president of Beijing Foton Daimler Automotive Co, a joint venture between Foton and Daimler, said the urban push creates not only opportunity for truck makers but also fierce competition.

"Currently, there are more than a dozen truck companies in China, but 10 years from now, the number may shrink to three or four," he said.

"During the process, the industry faces consolidation, amid the new opportunities arising from the urbanization."

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