Switching gears for R&D edge

Lorry exporter Sinotruk adopts new development model for lead worldwide

For the past 13 years, commercial vehicle manufacturer China National Heavy Duty Truck Group Corp, better known as Sinotruk, has been the country's largest heavy-duty truck exporter.

But the Jinan, Shandong province-based company wants to achieve more. So, it is consolidating, expanding and charting new paths into the international market, company executives said.

Sinotruk has clear plans to keep the momentum going, its chairman Wang Bozhi said. "By the end of this year, we are planning to set up three research and development centers in Hong Kong, Denver in the United States, and Munich in Germany."

Wang is leading Sinotruk's shift to a new development model that has focus on improved R&D capabilities the world over.

The planned three R&D bases will be Sinotruk's first batch of such facilities overseas, according to Lan Junjie, general manager of the company's international business department.

"We hope these R&D laboratories can give us access to leading technological knowhow from overseas scientists and further promote our innovation capability. For now, the projects are progressing well. We're confident of starting the centers on schedule," Lan said.

The shift in strategy comes on the back of Sinotruk's annual exports that accounted for 40 percent of the country's total on average over the last few years.

Since launching its internationalization strategy in 2004, the company has sold about 350,000 units of heavy-duty trucks to 116 countries and regions.

These markets cover the emerging economies of Central Asia, Africa, the Middle East and South America, as well as developed markets such as Australia and Ireland.

Its products were also sold to other BRICS member countries Brazil, Russia, India and South Africa. Last year, its exports to countries and regions participating in the Belt and Road Initiative accounted for 47 percent of the company's total exports.

In the first half of this year, the commercial vehicle giant exported about 1,900 units of heavy-duty trucks, an increase of 25 percent year-on-year－the fastest-ever such rise.

The overseas move for edge in R&D is part of the company's ambitious goal to increase annual sales of medium and heavy-duty trucks in overseas markets to 60,000 vehicles by 2020, accounting for 35 percent of the company's total sales.

So far, Sinotruk has set up 70 overseas offices and distribution bases around the world, with nearly 8,500 employees. It established three subsidiaries in Russia, South Africa and Kazakhstan, one joint venture in Nigeria, and made an equity investment in a US company.

It also founded 17 assembly lines in foreign markets, which provides strong support for expanding the international market.

Sinotruk's fast overseas expansion is partially underpinned by a strong uptrend in the industry.

In 2017, sales of heavy trucks exceeded 1.11 million units in China, up 52 percent year-on-year and a record since 2010, according to the China Association of Automobile Manufacturers.

This year so far, overseas markets continued to hold promise for Chinese heavy truck producers, as the Belt and Road Initiative advances and the number of infrastructure projects in the participating economies has increased, according to a recent report from the Qianzhan Institute for Industrial Research.

Lured by the vast potential, Chinese major commercial vehicle manufacturers such as Sinotruk and FAW Jiefang Automotive Co, are racing to grab market share from global truck brands such as Germany-based Man Se and Czech manufacturer Tatra.

Besides fierce competition, challenges include securing adequate overseas orders, Lan said.

"As the import volume of China's commercial vehicle products increased, some governments moved toward protectionist measures in favor of the local automobile industry, and trade protectionism has risen," Lan said. "They gradually set up technical and policy barriers to limit the entry of Chinese automobile products."

Lan cited the Brazilian government's industrial product tax policy to restrict the entry of Chinese automotive products, and the Russian government's recycling tax imposed on imported cars－importing a car to Russia involves paying a fee to cover the future cost of recycling it, a form of green tax.

"To cope with the challenges, Sinotruk has improved its product mix and adapted the marketing methods to foreign markets," Lan said.

"We also appeal to the Chinese government departments concerned to conduct bilateral or multilateral negotiations with foreign countries to tackle the rise of trade protectionism."

Asked about the impact of the escalating China-US trade tensions on vehicle exports from China, Lan said the auto industry is not affected since Chinese heavy trucks are not exported to the US in large numbers.

Sinotruk went public in 2007 by listing on the Hong Kong stock exchange. It thus became a red chip stock－a company based in the Chinese mainland whose shares are traded internationally.

In March, it delivered the first batch of 34 new street washer vehicles to Hong Kong's local government. The delivery marked an important step for Sinotruk in gaining a toehold in the competitive Hong Kong market, which has stricter automotive fuel and emission standards.

Wang, Sinotruk's chairman, said the significant move laid a foundation for the country's heavy truck producers to expand their businesses in developed markets.