Make inexpensive vehicles for mainland, truck makers advised

PUBLISHED : Thursday, 09 September, 2010, 12:00am
UPDATED : Thursday, 09 September, 2010, 12:00am
 

Global commercial truck and parts makers have underestimated the growth of the mainland market as they have failed to churn out 'value-engineered' products to meet local demand, according to business advisory firm AlixPartners.

Established players such as Daimler and Volvo would do well to produce inexpensive vehicles for mainland clients by reducing the complexity of the products, AlixPartners said in a recent report.

The mainland emerged as the only major market for trucks last year, recording a 22 per cent production rise. Worldwide, production volume declined 29 per cent.

Lower-cost trucks made by Chinese companies including Dongfeng Motor and First Automotive Works have outdone big-name players in meeting domestic demand as well as that of emerging markets such as Africa and Southeast Asia, posing a challenge to the big-name foreign rivals, according to AlixPartners.

'Localisation of products to specific markets is crucial to capture market share in this global environment,' said Ivo Naumann, a managing director of AlixPartners and head of the firm's Shanghai office. 'China has successfully entered the middle market for trucks, which are in huge demand in the fastest-growing economies of the emerging markets, including China.'

The mainland became the largest maker of middle- and heavy-duty trucks in 2007. Five Chinese manufacturers made the list of the world's top 15 commercial truck suppliers by production volume last year.

Chinese players dominate the low and middle segments of the domestic and emerging markets. China exported 134,000 units of commercial vehicles in the first half of this year, up 25.2 per cent from a year ago.

The advisory firm predicted the mainland's truckmakers would contribute more than a third of global production, which is estimated to hit 3.66 million units in 2014.

Profitability for Chinese manufacturers remained consistent in 2009 when European and North American rivals were facing the economic downturn amid a decline in production.

AlixPartners says truck makers should design lower-performance products affordable to Chinese customers. A heavy-duty truck made in China sports a price tag of US$50,000 while a high-end truck in Europe costs up to US$120,000.

'Western suppliers did not engineer products specifically for local markets' needs, whereas domestic suppliers were able to re-engineer parts which allowed them to meet local demand and prices due to their significantly lower cost,' it said.

Share

Send to a friend

To forward this article using your default email client (e.g. Outlook), click here.

Enter multiple addresses separated by commas(,)

CAPTCHA
This question is for testing whether or not you are a human visitor and to prevent automated spam submissions.
Image CAPTCHA
Enter the characters shown in the image.