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On November 21, 2008, China National Heavy Duty Truck (Hong Kong) Co., Ltd. announced that the company is "talking with an independent third party about possible long-term strategic cooperation." The two parties are discussing the scope and form of possible cooperation and Sinotruk may therefore increase important strategic investors. If this cooperation can be achieved, it will be the fourth time that Sinotruk’s more important foreign cooperation has taken place.
China has now become the world's largest heavy truck market, with its own brand products occupying the dominant position. The international heavy truck giants are eyeing the Chinese heavy truck market, but suffer from the lack of a suitable breakthrough. In this case, the news of the contact between domestic and foreign companies is particularly eye-catching.
Three times of foreign cooperation are winners
The first foreign cooperation of Sinotruk was the introduction of Steyr technology. Although the implementation of the project during the contract period was not very smooth due to various factors, this cooperation will at least reduce the gap between China's heavy truck manufacturing technology and foreign countries by 20 year. Based on Steyr's technology, a heavy-duty truck technology platform suited to China's national conditions has been formed.
Established a joint venture with Rockwell Co., Ltd. of the United States to establish the Chiayi Chichehashi Co., Ltd., which is the second foreign cooperation of Sinotruk. As a result of the unsuccessful cooperation, Rockwell eventually transferred its ownership to China National Heavy Duty Truck at a nominal price of US$1. On the surface, this cooperation has failed. In fact, Sinotruk digested and absorbed the technology of a single-stage reduction drive axle from a brief cooperation, and trained a group of technicians. After the closure of Ji'nan Chihashi Co., Ltd., China National Heavy Duty Truck successfully developed a single-stage deceleration drive axle (including twin bridges) suitable for Chinese users, and became a key assembly of Haohe heavy truck.
The third cooperation was a joint venture with Volvo to establish Jinan Huawo Co., Ltd. The time for the normal operation of the joint venture has not been long since the joint venture negotiations. The fate of the joint venture did not affect the development of Sinotruk. On the contrary, Sinotruck obtained a set of cab drawings and dies from Volvo, which greatly shortened the development cycle of the Haohe series heavy trucks and reduced the R&D costs. The Haohao cab, which was developed on the basis of the donated cab drawings, has become a symbolic assembly of Hao Hao series heavy trucks.
What the two parties want from cooperation
Although CNHTC issued an announcement that it did not disclose which foreign partner it intended to cooperate with, the announcement indicated that the cooperation method may include the content produced by truck technology licenses. Therefore, it is certain that the other party is a powerful international heavy truck manufacturer.
Since the other party interested in cooperation is a powerful international heavy truck manufacturer, it is estimated that the purpose of foreign cooperation is to enter the Chinese market through new cooperation methods. As the production cost of heavy trucks in China is only 1/3 of that of similar foreign products, CNHTC's vehicle manufacturing technology is close to the international level, and it is not ruled out that the other party may seek OEM cooperation.
For China National Heavy Duty Truck, what is needed is international advanced product technology. Although the technology currently owned by China National Heavy Duty Truck is sufficient to meet the needs of the domestic market, and the ability to independently develop products is basically formed, it is still relatively weak in terms of development tools and the development capabilities of individual assemblies. If we obtain product technology synchronized with the international level and achieve simultaneous upgrade through cooperation, we will be able to maintain our leading position in product technology.
The funds are also urgently needed by China National Heavy Duty Truck. It is reported that China National Heavy Duty Truck has already achieved the production capacity of 125,000 vehicles identified in the 11th Five-Year Plan ahead of schedule. The next plan is to produce 250,000 vehicles a year, of which 1/3 of the products are exported. The existing production platform upgrades, new capacity building, and overseas market after-sales service system construction all require funds. Due to the low sales price of domestic heavy-duty trucks and the meager corporate profits, it is apparent that the accumulation of their own funds will not meet the needs of development.
Cooperation may be equity
It is understood that there are two possible ways of cooperation between CNHTC and foreign parties. One is the production of foreign products with licenses, and the other is the participation of the other party in the equity group. The specific form of equity participation may include the issuance of new shares by the company to the other party or the transfer of the existing shares of the company.
A simple technology license may be acceptable to Sinotruk. Of course, this technology transfer is not a one-time, but it should be a rolling transfer within the contract period. However, this does not comply with the strategic intentions of the foreign parties. As long as there is no capital-level cooperation, the two sides are competing. Selling technology to a competitor, the best price will eventually be a loss-making business. This kind of cooperation is difficult to become a reality.
Participating in stocks is an ideal choice for cooperation between the two sides. The question is what kind of equity participation method will be adopted. If the transfer of the issued shares is adopted, no matter who the transferor is (perhaps the major shareholder CNHTC Group), the other party's investment cannot enter the listed company. If the transferor is a major shareholder, as long as the major shareholder does not lose absolute control of the listed company (the current shareholding ratio is approximately 64%), it will be more detrimental to the other party. After all, its major shareholders are related to automobiles in addition to the listed company. Business.
Therefore, the additional issuance of new shares to the other party is the most likely form of cooperation, just as Buffett invested in BYD Auto. The difference is that in addition to funding, the other party may transfer the technology by way of a license. The difficulty in issuing new shares in a targeted manner is that the issuance price is not well determined because the level of the additional issuance directly affects the rights of existing foreign investors.
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Sinotruk's first three foreign cooperation
Steyr Automotive Technology
On July 7, 1983, the Steyr project feasibility study was approved by the state. On December 17, 1983, China National Heavy Duty Truck Group and Austria's Steyr-Daimler-Puch Corporation signed the "Heavy-duty Vehicle Manufacturing Technology Transfer Contract" in Beijing with a contract term of 10 years. In June 1989, the first China-made Star-Steyr heavy-duty vehicle went off the assembly line at Jiqi Steam Plant. During the contract period, the cumulative production of Steyr vehicles was less than 10,000. After the contract expired in 1993, the parties negotiated to extend the cooperation period appropriately. On April 5, 1995, a national acceptance team consisting of the Ministry of Machinery Industry, the State Planning Commission, the Ministry of Economics and Trade and other ministries and commissions carried out state acceptance of the Steyr project.
Rockwell Corporation
Joint venture to establish Jinan Chiche Bridge Co., Ltd.
On January 1, 1997, the joint venture established by Sinotruk Group and Rockwell Company of the United States was formally launched. The joint venture parties jointly contributed 130 million yuan, each accounting for 50% of the shares. In 2001, Rockwell transferred its shares to China National Heavy Duty Truck Group at a symbolic price of US$1, and the partnership project between the two sides was terminated. Since then, Sinotruk Group has integrated the assets of the Jinan-Chichi Bridge Co., Ltd. and established the Bridge Box Company.
Volvo Trucks
Joint Venture Established Jinan Huawo Truck Co., Ltd.
On June 9, 2003, the joint venture project between China National Heavy Duty Truck Group and Volvo Truck Company Heavy Vehicle was officially signed. On June 30th, the Ministry of Commerce approved a joint venture contract between China National Heavy Duty Truck and Volvo. The two parties jointly invested RMB 1.6 billion, each accounting for 50% of the shares. On July 10, the joint venture Jinan Huawo Truck Co., Ltd. was established. On March 31, 2004, Jinan Huawo Truck Co., Ltd. officially opened. On the same day, the first Volvo heavy-duty truck produced in the country went offline, but the joint venture’s car production and sales have not reached the expected target.
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