In the third quarter of 2005, Tan Xuguang, the leader of Weichai Power, made a bold move by acquiring Hunan Torch for 1 billion yuan during the lowest point of China's heavy truck industry. This strategic acquisition earned him the nickname "Tan Bold." After the merger, the industry rebounded strongly, and Tan later remarked, "Now 4 billion yuan wouldn't even get you in." The acquisition significantly boosted Weichai’s competitiveness. Reflecting on this success, Tan emphasized that thorough research and understanding of industry trends were key to their decision. He believed that China’s heavy truck industry was entering a new phase, and Weichai had already prepared to shift its product lineup to a 12-liter high-power engine, which could become a new competitive advantage.
Kong Peng/Wen
"Modern entrepreneurs must be driven by two wheels: product management and capital management," Tan Xuguang said, summarizing his leadership approach at Weichai Power. He noted that while Chinese entrepreneurs once focused mainly on product development, in recent years, many have shifted attention to product management alone. However, Weichai has maintained an edge by integrating both product and capital management, creating a broader space for growth.
On August 8, 2005, Weichai outmaneuvered competitors such as Wanxiang, Xifei International, and China National Heavy Duty Truck to acquire a 28.12% stake in Hunan Torch for 1.023 billion yuan. This deal marked a turning point in the heavy truck industry and solidified Weichai’s position as a market leader.
Tan recalled the acquisition process as a thrilling and strategic game. At the time, Delong’s assets were under Huarong Asset Management’s control, and Tan anticipated a public tender. However, Huarong had already formed a partnership with Wanxiang, making the bidding process biased. To counter this, Tan created a joint venture called "Weifang Investment" with state-owned enterprises, raising capital efficiently and avoiding complex procedures typically required for Hong Kong-listed acquisitions.
"I bid high, I was right, and I was forward-thinking," Tan said. At the time, the heavy truck industry was in a downturn, but after the acquisition, it rebounded strongly. By 2007, Hunan Torch generated over 1 billion yuan in profits for Weichai, far exceeding the initial investment.
"We don’t do superficial things," Tan said, emphasizing that the acquisition wasn’t just about low prices but also about acquiring high-quality assets like Shaanxi Heavy Duty Truck and Fast Transmission. This allowed Weichai to evolve from an engine manufacturer into a full powertrain company, leveraging synergies between engines, transmissions, and axles.
From an international perspective, Tan acknowledged that global heavy truck manufacturers like Mercedes, Volvo, and MAN have their own engine plants. However, he remained skeptical about expanding into vehicle manufacturing, citing lower profit margins compared to engines and transmissions. "To do business is to make money," he said.
He analyzed the industry’s concentration and predicted a major shake-up by 2012, as overcapacity and declining margins would force weaker players out. In the meantime, independent engine and assembly companies still had room to grow. Despite some automakers announcing plans to develop their own engines, none had done so successfully yet.
Tan criticized the homogenous competition in China’s auto industry, arguing that true differentiation and innovation are rare. He urged companies to focus on profitability and core technology upgrades rather than just market share.
"In the capital market, integrity is the most important thing," Tan emphasized. As a former technical expert who transitioned into international trade and then into leadership roles, he valued transparency and honesty. When Weichai re-listed in Hong Kong in 2002, he insisted on maintaining credibility, which helped build trust with global investors.
He also stressed the importance of keeping promises in the capital market. Despite initial skepticism, Weichai’s consistent performance earned the trust of fund managers. His straightforward approach earned respect, even when he warned of a potential decline in the heavy truck industry in 2008 due to stricter emission standards.
"We don’t lie," he said. While others were optimistic, Tan warned of a possible 50% drop in sales. But he also highlighted that Weichai was preparing for the shift by developing a 12-liter high-power engine, positioning itself for future growth.
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