Foton Motors and Cummins have signed a formal joint venture agreement to establish a light-duty diesel Engine with a 50:50 equivalent investment. In a move, Cummins, Fukuda wants to consolidate the status of the light truck boss.
On October 19, Foton Motors and Cummins signed a formal joint venture agreement. Cummins and Foton will establish a light-duty diesel engine company, Beijing Foton Cummins Engine Co., Ltd., at a 50:50 equivalent ratio to produce Cummins' new generation 2.8-litre and 3.8-litre light-duty diesel engines.
The joint venture between the two companies is not too strong, because Cummins is the world’s largest independent engine manufacturing company, and Foton Motor is China’s largest light truck manufacturer. This joint venture is very beneficial to the two companies. Foton hopes to integrate Cummins engine products into the European and American markets, expand exports, and consolidate its first position in light truck sales. Cummins will complete its strategy in China. layout.
The total investment of the project is nearly 2.5 billion yuan
The cooperation between Futian and Cummins started in 2004. At the time, Cummins, as a supplier of Foton, provided part of the heavy-duty power to the Fudan-owned Euro V and Auman heavy trucks. After more than two years of coordination and negotiation, in March this year, the two sides signed a feasibility study on the joint venture to establish a light-duty diesel engine production enterprise. The joint venture agreement was formally signed on October 19.
Beijing Futian Cummins Engine Co., Ltd.'s engine products will be widely used in light trucks, pickup trucks, SUVs, MPV utility vehicles and small off-highway equipment. According to reports, the part of the products produced by the joint venture company will be used for vehicles of Foton Motors and its subsidiary brands, and the rest will be sold domestically and exported through Cummins' sales network.
A major feature of the joint venture project between Foton and Cummins is the large investment. General manager Wang Jinyu of Foton Motor stated that the joint venture will be officially put into production in 2008, and the annual production capacity is expected to reach 400,000 units. The total investment of the project is nearly 2.5 billion yuan. It is worth 1 billion yuan.
Another outstanding feature of this joint venture project is that the two models that the joint venture is about to put into production are all new products in the true sense, and have never been put into production in any place including the United States. Hua Jinsheng, chairman of Cummins (China) Investment Co., Ltd., told reporters that the two new products are Cummins invested heavily to build high-performance light-duty diesel engines developed for Europe and the United States and other developed automotive markets, with a high starting point, high performance and low emissions characteristics , To meet the EU III, EU IV and above emission regulations.
Fukuda wants to consolidate the position of the boss
In recent years, China's light truck market has been developing rapidly. The 2005 young card output reached 860,000 units, and it is expected to maintain a growth rate of about 8% in the future. Foton Motor began production and sales of light trucks in 1999, and has three high-end, medium- and economy-grade products. Among them, Ao Ling and the Times worked hard in the mid- to high-end light-card market and the economical light-card market, while Omarco took the high-end route. At present, Foton has maintained its position in the light truck industry for the first time in eight years, and has occupied more than 30% of the domestic light truck market.
Although Fukuda has been leading, but the pressure on the body is also quite large. Currently, there are many manufacturers of light trucks in the market, among which sales of light trucks such as JAC and Dongfeng are closely followed by Foton, and sales of Brilliance Jinbei etc. have also been fierce in recent years. Some manufacturers also have obvious regional advantages, such as Jiangling and Qingling in the south. Higher sales.
Under such circumstances, Foton must continuously improve its products and services to maintain its leading position. Since the engine is the core component of the light truck, users generally pay more attention to this, and Cummins Engine has a high degree of awareness among users, so it is not difficult to understand why Fukuda chose Cummins.
“Light trucks are the products that Futian started, and it is definitely necessary to do well. Now, Futian's economy light trucks sell more, and after a joint venture with Cummins, they can seek breakthroughs on high-end light trucks and strive to open up gaps with competitors.†A person familiar with Futian Industry insiders told reporters.
According to reports, Futian uses the Cummins engine high-end light trucks, will be the main overseas market. Fukuda's long-range vision in 2010 set a target to achieve sales of 1 million vehicles, of which sales in overseas markets will account for 30% of the total, or 300,000 vehicles. This shows that Foton has high expectations for overseas markets.
However, exporting overseas is not easy. At present, China's automobile exports are mostly concentrated in the less developed regions of the automotive industry in Southeast Asia, Africa, and Latin America, and are still less exported to the core areas of the automotive industry in Europe and America. The reason is that product quality, emission standards, and after-sales services are all major obstacles. For Futian, the Cummins engine that meets Euro IV emission standards will undoubtedly enhance the competitiveness of Foton light trucks in the European and American markets.
“The cooperation between Foton Motor and Cummins is a combination of technology and market, and it is a win-win cooperation. The engine with international technical level will provide a better heart for the high-quality Futian commercial vehicle, and will fully enhance the quality of Futian products. The brand and image enhance the competitiveness of Futian Commercial Vehicle's international market," Wang Jinyu said.
Cummins completes its layout in China
The value of this joint venture for Cummins is no less than Futian. "One woman and many marriages" has always been a typical feature of the rapid development of Cummins. Cummins began to enter the Chinese market in the 1970s and was one of the first US companies to seek commercial cooperation in China. In the following 30 years, Cummins has owned 9 companies and more than 20 institutions through sole proprietorships and joint ventures in China. It is the largest foreign investor in the Chinese diesel engine industry. In the past two years, Cummins’ turnover in China has continuously exceeded US$1 billion, accounting for more than 10% of its global business. China has become one of the fastest growing overseas markets in the world.
Cummins had previously invested in the medium- and heavy-duty diesel engine sector, so Cummins is also looking for new partners to produce light-duty diesel engines and complete its layout in China. The cooperation with Foton is its largest light engine investment project in China, and it is also the only light diesel engine production base outside the United States.
At this point, Cummins completed the introduction of the entire range of automotive engine products into China's overall layout: in the 4 to 9 litre mid-horsepower engine, it cooperated with the Dongfeng commercial vehicle with the largest sales volume of medium trucks, and cooperated with Shaanxi Auto in the 11 litre high-powered engine. For light engines, Beiqi Foton, which occupies 1/3 of the light truck market, joins hands.
"This cooperation is a key step in the development of Cummins' business in China. Cummins strives to introduce a full range of products including heavy-duty, medium-sized and light-weight engines to the Chinese market and achieve localized production," said Cao Side, vice president of the Cummins Group.
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