Once localized production of heavy, medium and light engine products, Cummins has the opportunity to become the largest supplier of heavy, medium and light truck engines in the Chinese truck market.
Not long ago, the global engine giant Cummins of the United States and Futian, China's largest light-duty truck company, signed a feasibility study on the joint venture to establish a light-duty diesel engine production enterprise.
The signatories of the feasibility study report include Beijing Foton Motor Co., Ltd., Beijing Futian Environmental Power Co., Ltd., and Cummins Inc. and Cummins Investment Co., Ltd. These four parties will jointly establish "Beijing Foton Cummins Engine Co., Ltd.".
According to this analysis, relevant people have been committed to introducing advanced technologies to Cummins in China. In order to consolidate China’s largest overseas market, its Chinese strategy is quietly changing.
In 2005, the sharp shrinkage of China's heavy truck market and the increase of competitors caused Cummins's joint venture projects in China to face a yellow warning. The potential crisis forced Cummins to bear the “transformation pain†and seek new partners to increase new profit growth while consolidating existing markets.
Joint venture is run
2006 was the thirty-first year that Cummins entered the Chinese market. Currently, Cummins has more than 20 institutions, 8 sole proprietorships and joint ventures in China. Its sales exceeded US$1 billion for two consecutive years, and more than 850,000 engines were put into use. This has become the largest foreign investor in the Chinese diesel engine industry.
The pressure on the Chinese market has made Cummins, who is good at medium-heavy and high-powered engines in the international market, have to intervene early in the field of light diesel engines.
In an interview, the reporter found that Cummins switched to light truck engines mainly because of two major reasons: First, the dramatic reduction in the heavy truck market in 2005 and the increase in competitors; Second, domestic joint venture projects have encountered embarrassing situations.
The former, such as Volvo and China National Heavy Duty Truck, Japan Isuzu and Qingling Motors respectively invested in the establishment of a joint venture; the latter, for example, after the cooperation between Cummins and Shaanxi Auto, Weichai Power, under the leadership of China National Heavy Duty Truck, indirectly controlled Shaanxi Auto, and the partners became Subordinate enterprises of direct competitors make it difficult for both parties to play.
China's truck market began to tilt toward heavy trucks in 2001, and the market for heavy trucks grew by an average of more than 60% per year. As evidenced by the case, Shaanqi, the leader of the time, produced less than 5,000 units of annual production in 2001, but its annual production in 2004 With more than 20,000 units, its growth rate is among the best.
It is understood that as early as 1986, Cummins started to cooperate with Dongfeng Motor in the way of license transfer. In June 1996, the two parties established Dongfeng Cummins Engine Co., Ltd. with a 50:50 equity ratio. In February 2003, the registered capital of the expanded Dongfeng Cummins Engine Co., Ltd. exceeded US$100 million through a capital increase and the shareholding ratio remained unchanged.
As a result, the Cummins and Dongfeng joint venture products have expanded from the original 3.9-liter engine to the current 3.9-liter, 5.9-liter, and 8.3-liter models, namely Cummins B and C series products. But for the introduction of 9 liters or more of heavy-duty diesel products in Dongfeng, Cummins encountered a problem: With the strategic cooperation between Dongfeng and Renault, the two parties reached an agreement to introduce Renault DCILL engines, so that Renault DCILL engines and Cummins heavy-duty diesel engines will Form direct competition.
In contrast, Cummins is in a weak competitive position. "In this case, for Cummins, finding a second partner is an effective way to solve the problem." An expert in Beijing analyzed the reporter.
Finding the destination for light truck products
In the light-duty-card market, Cummins has pre-empted people. “Fukuda is a key step in the development of Cummins' business in China.†Hua Jinsheng, Cummins Global Vice President and President of the East Asia Region, did not say that Cummins’ transformation in the Chinese market.
“The feasibility study report signed by Futian Company is a key step before the two parties sign the joint venture contract.†Yang Fang, Marketing Manager of Cummins East Asia Market, told reporters: “The two sides will take shares in capital, equipment, land and technology, this year. Established in the third quarter and put into production in 2008."
According to the feasibility report, Cummins and Foton will establish a 50:50 joint venture to produce a new generation of Cummins high-performance light-duty diesel engines. The products will be used in light trucks, pickup trucks, SUVs, MPV utility vehicles and small non-compact vehicles. Highway equipment and other fields.
To this end, Cummins offers two "real new products" to Foton. According to reports, the above two new engines have never been put into operation anywhere.
As the world's largest manufacturer and supplier of diesel engines with more than 50 horsepower, Cummins has always been a blank in China's light truck market. Until it cooperated with Foton, it had completed this wish. Fukuda chose as a partner to find a satisfactory home for the Cummins 1.3-liter light truck engine in China.
According to the feasibility report, the joint venture has a duration of 30 years, a total investment of 1.946 billion yuan, a registered capital of 1.019 billion yuan, and funds will be available within three years. Compared with Xi'an Cummins Engine Co., Ltd., which was built last year by Shaanxi Heavy Duty Truck and Cummins, this shot is even more powerful.
It is reported that the above project is of great significance to Cummins. "Cooperation with Foton is Cummins's first large-scale entry into the field of light commercial vehicles in the world and will further improve the diversified structure of Cummins products and markets." Yang Fang said, "Fukuda is currently the largest domestic light truck company in terms of sales volume. Cummins is the world's largest independent engine manufacturer, and this cooperation will surely bring a win-win situation."
"Fukuda chose to cooperate with Cummins, first of all to meet the requirements for the upgrading of domestic emission regulations, and secondly to meet the needs of the global product development strategy," said the person in charge of the general manager of Beijing Foton Motor Co., Ltd..
Transformation is to expand
Since the 1980s, Cummins has successfully completed the transformation from traditional heavy-duty engine manufacturers to a full range of all-round, multinational independent diesel engine manufacturers.
According to analysts, while Cummins continues its strategic cooperation with outstanding Chinese companies, it will be able to become the largest supplier of heavy trucks, medium trucks, and light truck engines in China’s truck market once local heavy-duty, medium-sized, and light engine products are produced locally. Business. This is the root cause of Cummins’ transformation.
According to reports, Cummins's full range of vehicle engine product introduction path layout has been completed. According to Cummins' latest plan, the following 9-liter vehicle engine will use Dongfeng Cummins as its production base, and its 9-liter-plus vehicle engine will use Shaanxi Steam as its production base. In the Chinese market, Dongfeng and Shaanxi Auto are two key pieces of Cummins.
The reporter was informed that Cummins is focusing on expanding the production capacity of Dongfeng Cummins and plans to increase from the current annual output of 130,000 units to 200,000 units in 2010. It is expected that Cummins’ China business will reach 3 billion US dollars by 2010.
Cummins’ sales in China exceeded US$1 billion in 2004, accounting for more than one-tenth of its global sales. In order to consolidate the Chinese market, Cummins will invest an additional US$300 million in the next five years.
In October 2005, the Cummins Global Board of Directors was held in Beijing. This is the first time that the Cummins Global Board has been held outside the United States for 15 years, which reflects the growing importance of the rapidly developing Chinese market in Cummins' global strategic system.
“Cummins has a good investment in China and can provide perfect after-sales service.†13 years ago, a customer in Northeast China purchased a Cummins mining engine and this customer had dinner with Cao Side, the current vice president of Cummins Group. This told him.
Perhaps, Cao Side has not forgotten the words of the Northeast customers, because that is an important magic weapon for Cummins's success in the Chinese market—a history testimony of localized production.
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