Sino-German joint venture pursues greater development
Reporter: German Deutz is a world-leading engine manufacturer. Dachai (Dahua Diesel Engine Co., Ltd. of FAW Jiefang Automobile Co., Ltd.) is one of the major manufacturers of diesel engines in China. In 2007, the two companies jointly established Deutz FAW (Dalian) Diesel Engine Co., Ltd. (hereinafter referred to as "Deutz FAW Dachai"). What are the considerations for establishing a joint venture between Dachai and Deutz?
Liu Tiezhuang: There are two main considerations. On the one hand, he hopes to take advantage of Deutz's brand and technological advantages to improve product quality and enhance brand influence. On the other hand, we hope to open the international market as soon as possible with the help of Deutz Global 1400 service outlets.
Reporter: In many vehicle and engine joint ventures, China cannot master the core technology. Does this situation exist in Deutz FAW Dachai?
Liu Tiezhuang: There is no such situation. As China's emission standards are lower than in Europe, Dychez imports Deutz products that are lower than European emission standards. Therefore, German Deutz has no reservations on the technical aspects of these models, and Chinese personnel can master the core technology.
Avoid competition with FAW Xichai
Reporter: Today, FAW has two diesel engine companies, namely Wuxi Diesel Engine Factory of China First Automobile Group Company (hereinafter referred to as “FAW Xichaiâ€) and Deutz FAW Dachai. Is there competition between the two companies?
Liu Tiezhuang: At present, Deutz FAW Diesel and FAW Xichai do have several models of homogenization. There is competition between the two parties, but this is only a temporary phenomenon. In order to avoid competition between the two sides, FAW Group has made clear positioning for two diesel engine companies. FAW Xichai provides heavy-duty engines with more than 300 hp and Deutz FAW Dachai provides light and medium-sized engines with a power of 300 hp or less.
Reporter: Internationally, DEUTZ company's heavy-duty engine technology is high in content and quality. Will Deutz FAW Daichai consider introducing heavy-duty diesel engines in the future?
Liu Tiezhuang: The strategy of FAW Group is very clear and the requirements are very strict. In the short term, we will not consider introducing heavy-duty diesel engines.
Seeing Cummins as benchmark
Reporter: From the aspects of equipment, management, and capital, Deutz FAW Dachai has a certain advantage in domestic high-end light and medium-sized engine markets. Which major companies are Deutz FAWC's current competitors in the domestic market?
Liu Tiezhuang: Because of the different product characteristics, application fields, and service types of different engine companies, we do not have direct competitors, but there are many indirect competitors, among which Cummins is a company that we are more concerned about.
Deutz's international background, business status, application areas and product features are similar to those of Cummins. In order to promote the faster development of enterprises, we often sum up the experience of Cummins joint ventures in China.
Reporter: Deutz FAW Diesel's light diesel engine has many customers. For example, Beiqi Foton is your important customer. If Beiqi Foton will purchase products from Foton Cummins, what impact will it have on your company's business?
Liu Tiezhuang: There will be an impact, but the impact will not be great. On the one hand, Beiqi Foton attaches great importance to the market base of Deutz FAW Dachai Diesel, and will continue to maintain cooperation. On the other hand, while we are consolidating our old customers, we are constantly developing new customers.
Reporter: What are the advantages of Deutz FAW Dachai's products?
Liu Tiezhuang: Deutz FAW Dachai has its own unique advantages as a joint venture. First of all, we have the world's most advanced power production equipment and follow the latest technical standards. Secondly, Deutz FAW Dachai's products are characterized by high technical content and reliable quality. In addition, in terms of services, our advantages are also obvious. We have a domestic market after-sales service system that cannot be compared with imported engines, and a foreign market after-sales service system that cannot be compared with domestically produced engines.
In China, we have 860 service stations and 20 spare parts centers that can ensure delivery of spare parts within 24 hours. In foreign countries, there are 1,400 Deutz international service centers in 173 countries. Today, Deutz FAW Dachai's products have entered the global joint security system, and all countries' users can receive satisfactory services.
Segment market goals are clear
Reporter: After the establishment of Deutz FAW Dachai, sales have seen rapid growth. In 2008, the company sold nearly 100,000 diesel engines. How about sales in 2009?
Liu Tiezhuang: In 2009, sales of medium and heavy-duty engines did not decline, and light engine sales continued to grow. In addition, major breakthroughs have been made in the sales of engines for construction machinery and tourist coaches. Overall, the company's sales are better than in 2008.
Steynitz: German DEUTZ started with a construction machinery engine and has been leading the development of the world's construction machinery power. After the establishment of Deutz FAW Dachai, after more than two years of development, the number of customers of construction machinery products has reached more than 60, in 2009 sales of about 7,000 units, accounting for 7% to 8% of total sales.
Reporter: Many people in the industry are optimistic about the auto market in 2010. What is the market expectation of Deutz FAW Dachai in 2010 and what products will the company focus on?
Liu Tiezhuang: In 2010, Deutz FAW Dachai will further expand its market. We have targets in various market segments. In the field of construction machinery, we will achieve rapid sales growth; in the medium-to-heavy truck segment, we will focus on maintaining the growth in the number of internal support of FAW Group; in the light-duty truck sector, if the government cancels the relevant preferential policies, sales of light trucks will be the same as sales in 2009; in the field of passenger cars We are actively exploring the bus market. We have supplied engines for nearly 5,000 buses in Wuhan and Dalian. In 2010, we will focus on opening the tourist bus market.
Steynitz: The company has high hopes for the development of construction machinery engines. In 2010, sales of such engines will account for about 12% of the company's total sales. It is expected that after 3 years, the company’s sales of construction machinery engines will account for 33% of the company’s total sales.
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