Foton Motor: Retained its own brand in the full heavy-duty card into the joint venture
On August 7, Daimler AG and Beijing Foton Motor Co., Ltd. signed a "Letter of Intent for Cooperation" in Beijing. The two parties will establish a joint venture company in China and at the same time in the world. Carry out strategic cooperation in the commercial vehicle sector.
If the joint venture is finally reached, Daimler will find a relatively cheap truck product platform to expand the medium and heavy truck market in emerging market countries. Many of the company's commercial vehicle products, especially the Mercedes-Benz brand heavy truck, are highly competitive in the global high-end truck market, but the price is too high, limiting its performance in emerging markets.
Since the JV will not introduce medium- and heavy-duty trucks based on the Mercedes-Benz technology platform, only Mercedes-Benz's technology will be used to improve the existing medium- and heavy-duty trucks of Foton Motors. Daimler will not be able to protect the brand's needs. The joint venture company uses the Mercedes-Benz brand and only uses the Futian Auman brand.
Due to the retention of the Auman brand, this was considered an extraordinary joint venture by Foton Motors. Zhao Jingguang, the company’s news spokesman, said: “This is a subversive joint venture form. We must abandon the traditional joint venture between Chinese and foreign investors to look at the joint venture between Foton and Mercedes-Benz.â€
According to the cooperation intention reached by both parties, Daimler plans to invest in Foton Motor as a strategic investor in the future. Moreover, in addition to medium and heavy trucks, the two sides may extend cooperation to Foton bus products and other fields.
Foton Motors will invest in the evaluation of all the medium and heavy truck business related to Auman, including land and production lines. It is expected that the assessed value will not be less than RMB 2 billion and Daimler will use the corresponding cash contribution. The formal joint venture contract between the two parties is expected to be signed several months later. Prior to this, the joint venture project needs the approval of the Chinese government.
Auman incorporated the Mercedes-Benz system?
According to the "Letter of Cooperation," the joint venture between Daimler and Foton Motor is more than just a production plant. It will become an operational center for global cooperation between the two parties, namely the management, control and decision-making center for the cooperation of the two parties, R&D center and supply. Chain management center, production base and marketing center.
Zhao Jingguang said that Auman will become one of Daimler’s global commercial vehicle brands. It is only a low-end brand, and will not compete with the Mercedes-Benz commercial vehicle, but will complement each other. However, "Ouman brand ownership still belongs to Foton Motor."
The medium-duty trucks of the joint venture will be distributed only using the Futian Auman brand, but those medium-duty trucks such as the Daimler MB OM457 engine will also be marked with "Mercedes-Benz power" to show its key Sources of technology and parts to improve product quality.
The agreement on brand use of the joint venture company makes Foton Motor proud. In fact, the agreement between the two parties on the brand is not the same as the initial intention of the negotiations. Since 2003, Mercedes-Benz and Foton have conducted three rounds of negotiations before and after. The first was a joint venture agreement under the framework agreement signed by Dyke and Beijing Auto Holdings, followed by the commencement of negotiations between Futian and Daiike in 2006, and finally the resumption of joint-venture negotiations after the issuance of 2008 was eliminated. From the third stage, the two parties decided that they would no longer take dual brands. It is understood that Foton Motor put forward the proposal that the joint venture company only use the Auman brand.
Foton Motors believes that during the five years of negotiations, the growing strength of Foton Motors has strengthened its position and right to speak, and eventually led to the joint venture company to retain and use only the Auman brand.
However, Orient Securities auto industry analyst Qin Xuwen believes that the joint venture company is not based on Mercedes-Benz technology platform, so Daimler will not allow the use of Mercedes-Benz brand, otherwise it will hurt the Mercedes-Benz brand.
Daimler owns several truck brands and has 35 production plants worldwide. In 2007, Daimler trucks sold nearly 468,000 vehicles worldwide. In the high-end heavy truck market, Mercedes-Benz and Volvo have monopolized the global market.
The Auman brand was born in 2004. Although it has achieved a certain market share, its brand influence and technical content in the heavy truck market still cannot be compared with traditional commercial vehicle companies such as FAW, Dongfeng, and CNHTC (000951, stocks). .
Joint venture earnings outlook
Although Foton Motor has introduced Mercedes-Benz's technology and engine, it is still unclear whether the joint ventures of the two companies will be able to obtain substantial profits. Before that, China’s medium- and heavy-duty trucks and Dazhong Kejia joint ventures had little profit record. Moreover, several major commercial vehicle companies have maintained cooperative relations with internationally renowned commercial vehicle manufacturers, and a joint venture project between Dongfeng Commercial Vehicle and Volvo is underway. These factors will affect the future market performance of the Daimler and Foton Motors joint ventures.
Qin Xuwen believes that in the cooperation between Foton and Daimler, Daimler will be in a dominant position because it has mastered key technologies. The future investment of Foton Motor in the joint venture company will exceed the current revenue of the company's medium and heavy truck business, depending on the degree of prosperity of the medium and heavy truck industry and the extent of Daimler's profit transfer to the joint venture company. He expressed cautious optimism for this cooperation.
In the next few years, the medium and heavy truck market in China will maintain a steady growth rate, which is about 10%-15%. Daimler can benefit from the introduction of Mercedes-Benz engines, technical support for joint ventures, and quality control. Like all profitable passenger vehicle joint ventures in China, Chinese companies are generally less profitable than foreign companies.
Qin Xuwen said that this cooperation means that all of Fukuda's medium-to-heavy truck business has entered the joint venture company. In the long run, Foton Motor has in fact lost the platform to upgrade the core technology of medium and heavy truck products.
CICC's research report pointed out that in the long run, the joint venture company can improve the overall strength of Foton Motor. In the short to medium term, both the running-in and product upgrades need a process, and it cannot be ruled out that the profit will be reduced due to foreign intervention and new product introduction. . The company maintains a "neutral" investment rating for Foton Motor.
It is worth noting that the two parties’ "Letter of Intent for Cooperation" also stipulates that in areas outside China, both parties can cooperate on Futian's entire series of products and strive to occupy a relatively large market share in the relevant international low-end market. Under the premise of profitability, joint venture industrial production of China's medium-heavy-duty truck joint venture products and other Foton products will be further implemented outside of China. A joint venture company will be established in Russia within two years and will be established in the next three years or so after the establishment of the joint venture company. Establish joint ventures in South and Central and South America.
Theoretically, the infrastructure of emerging market countries such as Russia and India has significantly lagged behind China. Their demand for medium and heavy trucks is greater than that of the Chinese market. Therefore, these overseas joint ventures will have greater market space. However, in India, Daimler has established joint ventures with local companies to produce trucks.
Zhao Jingguang said that the joint venture with Daimler could help Foton to avoid the obstacles that Chinese auto companies often encounter when setting up factories in foreign markets.
View related topics: Beiqi Futian, Futian Automobile brand value of 22.157 billion yuan