China's automotive industry has grown nearly 2,000% in the past 20 years to a whopping 13.6 million total autos sold in 2009—surpassing the US to become the world's number one auto market.
Unlike the passenger auto market, the Chinese commercial auto market is led by domestic Chinese companies. Heavy truck sales grew by an astounding 141% while medium truck sales grew by 54% in 2009. Truck sales will continue to grow over 15% a year for the next several years.
The table below shows the top truck sales by brand in 2009, from which we can see that of the top ten, 9 are local brands, and only one is produced by joint ventures with foreign auto makers.
Heavy Truck Sales Top Ten 2009
From: http://www.motorlink.cn/html/statisticDate/1000012655dd406a20100127115240109.html
Ranking Brand Annual Sales
1 FAW 141,568
2 CNHTC 124,726
3 Dong Feng 116,033
4
Foton 82,234
5 Shannxi 67,416
6 Beiben 28,018
7 SAIC-IVECO 19,609
8 CAMC 18,271
9 JAC 12,899
10 SITOM 9,954
In the past, Chinese domestic truck enterprises led the Chinese truck market. However, as China's demand for commercial vehicles has increased along with better technology levels, more and more foreign commercial vehicle enterprises have set up ventures in China or at least courted the market over the last few years. So far, only a few joint venture enterprises have been set up though: CNHTC–MAN, SAIC-IVECO, and GM-FAW, being the most well known.
Foton and Daimler, Europe’s biggest truck maker, signed a formal agreement in July of this year to set up a 6.35 billion yuan (US$937 million) venture to make medium and heavy duty trucks in Beijing. The trucks will bear the Auman brand and use Daimler’s/Mercedes engine technology.
Moreover, China's Anhui Jianghuai Automobile Co., Ltd, a leading truck manufacturer, signed a framework agreement with NC2 Global LLC in 2009 to set up a 50:50 joint venture in China. It is understood that negotiations regarding this deal are continuing.
Policy on Foreign Investment
According to the latest Policy on Development of Automotive Industry jointly issued by the National Development and Reform Commission (“NDRC”) and Ministry of Industry and Information Technology (“MIIT”) on 15 August 2009 and commencing operation on 1 September 2009, currently one foreign entity is entitled to set up no more than two joint ventures manufacturing the same type of entire auto products, and its share in the joint ventures must be no more than 50%. It is not restricted by the above provision if investing to manufacture exported automobiles and engines for automobiles within the export processing zones, but such a venture would need approval by the State Council.
Key Government Departments
China’s auto industry is regulated by several governmental departments. The NDRC is the major department that guides the regulations and policies regarding this industry. Other departments perform their rights within their respective responsibilities:
1. NDRC
The NDRC makes and amends auto industry development policies of China every few years. The establishment of new sino-foreign joint ventures in the automobile manufacturing sector requires approval from the NDRC. It is also involved in setting policy guidelines for the manufacture of new energy automobiles, external marks of automobile products and recalls of detective automobile products.
2. Ministry of Commerce (“MOFCOM”)
The MOFCOM is heavily involved in the approval of new auto ventures, competition law issues and varying aspects of auto policy.
3. State Administration for Industry & Commerce (“SAIC”)
The SAIC is in charge of registration of auto management enterprises, check and ratifying of business scopes of auto sales enterprises, supervision of auto brands sales and examination and approval of recordals of brand auto management enterprises. It is also in charge of dealing with market price manipulation issues.
4. General Administration of Quality Supervision, Inspection and Quarantine (“AQSIQ”)
The AQSIQ implements checks and investigation on defective automobile products, organization and administration of recalls of defective automobile products, and inspection of imported automobiles. It basically polices the standards which are drafted and set by industry bodies.
Conclusions
The Chinese commercial vehicle market has developed rapidly from 2005 to 2008, but slowed when the GFC began to be felt in China and around the world. It is worth noting that on January 1, 2008, the implementation of the new environmental/emissions standard, known as the National Standard III, forced commercial vehicle enterprises to invest large amounts of capital in introducing new manufacturing and maintenance technology and adjustments of their production and marketing strategies. This contributed to the slowing of expansion as well. Industry sources claim that from the beginning of 2010, demand has continued to increase again in the commercial vehicle sector, with the outlook for 2011 being positive.
