Recently, media reported that SAIC, Iveco, and Chongqing Hongyan are in close contact, and the joint venture hopes to make substantial progress. When the news came out, the Red Rock reorganization incident that had been quiet for half a year was once again the focus of attention in the industry.
SAIC wants to use Hongyan to build a heavy truck market
As early as last July, Shanghai Automotive Group Co., Ltd. and Iveco, a subsidiary of the Italian Fiat Group, reached a formal joint venture agreement. The two companies will set up SAIC Iveco Commercial Vehicle Investment Co., Ltd. at a ratio of 50:50. It is said that after the agreement is approved by the Chinese government, SAIC Iveco will complete the acquisition of a 67% stake in Chongqing Hongyan Automobile Co., Ltd. At the end of last year, SAIC signed a strategic cooperation framework agreement with Iveco and Chongqing Zhongqi, and the three parties will reorganize Chongqing Hongyan, a company owned by CNHTC. According to the agreement, Chongqing Heavy Duty Truck Sinogas Iveco will transfer a 67% stake in Chongqing Hongyan, and the three parties will jointly develop a heavy-duty vehicle and an engine.
However, after half a year, the joint venture has not made substantial progress. It was reported from the industry that the SAIC Iveco Joint Working Group has already settled in Hongyan, Chongqing and began to participate in the management of Hongyan.
SAIC seems to be keen to introduce foreign forces to acquire companies that have sufficient strength in a certain product line. Five years ago, its joint venture with Wuling and GM was the best evidence. Today, SAIC seems to be playing tricks again and is in close contact with Iveco and Hongyan. If SAIC through the joint venture with GM, Wuling, is intended to make up for its shortage in the micro-car field. Now SAIC's reason to "see" Hongyan is obviously its advantage in the field of heavy trucks.
At the end of 2005, Xiao Guopu, vice president of SAIC, once disclosed to the media that SAIC Motor’s goal of 50,000 heavy trucks was to be achieved at the end of the “Eleventh Five-Year Plan†period. However, SAIC Huizhong has a production capacity of only 10,000 units. To reach the goal of 50,000 vehicles, SAIC Motor will have to take further actions. At that time, SAIC Motor’s joint venture negotiations with Iveco and Hongyan are proceeding in full swing.
It is understood that Hongyan Automobile currently owns two brands of “Red Rock†and “Steyrâ€, 25 series, and more than 1,000 varieties. The product load capacity covers the 5-60 tons range, and the annual sales of nearly 30,000 vehicles are completed. In addition, Hongyan Automobile exports to more than 30 countries and regions such as Southeast Asia, Africa, the Middle East, and South America. Due to Hongyan’s focus on follow-up support for export vehicles, it has a good reputation in these countries. Some industry sources told reporters that SAIC Motor’s acquisition of Hongyan not only enriches the vehicle but also achieves the goal of expanding production capacity, which is much easier than building a new factory. From another point of view, the location of Hongyan can exactly fill the blank of SAIC in the southwest region, and is an important step to help it achieve a national layout.
Red Rock wants to recapture SAIC
For Chongqing Hongyan, taking the joint venture road seems to be an inevitable choice for regrouping.
Four years ago, Hongyan once was the “big brother†in the heavy-duty truck market of more than 15 tons. In 2001 and 2002, Hongyan sold 7,568 vehicles and 12,650 vehicles, respectively, and their market share was 5.15%, ranking first in the industry. In 2004, the market share of Hongyan Automobile declined significantly, and the ranking in the industry fell to the fourth place. Currently, Hongyan's ranking in the industry still lags behind that of China Heavy Duty Truck, Shaanxi Heavy Duty Truck and Beiqi Foton.
The problem now facing Hongyan is that there is no abundant capital injection and no advanced technology sources, and competitors have already found technical partners: Heavy Gas has introduced Volvo, Shaanxi Automobile has introduced German Man, and Foton and Mercedes-Benz have negotiated, and they have also Because of the new model, it took a lot of market share. If Hongyan cooperates with SAIC and Iveco, it will be able to solve the financial and technical difficulties of Hongyan.
He Yong, chairman and general manager of Hongyan Automobile Co., Ltd., said that the joint venture idea is very clear, and the joint venture company mainly resolves the technical sources and product upgrade issues of Hongyan. "Although we are not at a disadvantage in terms of technology, Hongyan must further develop. To surpass our competitors, we need to use foreign technology to speed up."
He believes that the biggest advantage after the joint venture is to shorten the cycle of technology replacement and can quickly apply Iveco's advanced technology to Hongyan vehicles. After the joint venture, Hongyan will develop products that are more suitable for China's national conditions to avoid the “acclimatization†experienced by most joint venture products. By then, Hongyan will have three brands: Hongyan, Steyr and Iveco.
Iveco also said that the reorganization will allow Hongyan to use Iveco's partial vehicle technology and Iveco's trademark to sell some of Iveco's models in China. In addition, SAIC, Iveco and Chongqing Heavy Duty Truck will jointly establish an engine company to design, manufacture and sell commercial vehicle engine products.
According to Guo Quan, deputy general manager of Chongqing Heavy-duty Truck Group Co., Ltd., there is only one Steyr platform at Hongyan. After the joint venture, Hongyan will have three product platforms: to develop and perfect existing red based on the Steyr platform. Rock and Steyr products form the first platform; using the advanced assembly introduced to enhance Hongyan and Steyr to form the second platform of the vehicle; to produce a new series of heavy-duty trucks with leading levels in the world today, forming a whole Car third platform.
He Yong does not say that the introduction of advanced technology is beneficial to the upgrading of enterprise technology, but if it cannot form its own core R&D capabilities during the introduction process, the ultimate “lifeblood†will fall into the hands of others, so the Chinese must master the core Technology, "Hongyan brand can not be lost, can not disappear, can not be diluted, we must use the digestion and absorption of advanced technology, inject fresh blood into Red Rock, give new meaning."
Prospective geometry
For SAIC, Iveco, and Hongyan’s joint venture, industry analysts believe that the three parties have joined forces and the collection of high-quality resources is very obvious, which will benefit the three parties’ respective future developments. First, it will improve the core competitiveness of Chongqing’s heavy-duty vehicles; second, it will be beneficial to SAIC’s improvement. Only cars lack the production system for commercial vehicles and heavy trucks. Third, Iveco's development strategy in China extends from Nanjing to western China, which further expands the coverage.
At present, the tripartite cooperation still owes a decisive step. Both SAIC and Hongyan are optimistic. An Iveco high-level insider revealed to the media that the major joint venture card is currently in the process of policy approval. The person said that as the right to examine and approve the joint venture of auto companies is in the hands of the National Development and Reform Commission, the current problem of overcapacity of vehicles may affect the smooth progress of approval.
Although the three parties to the cooperation are very positive about the joint venture, the final time for establishing the joint venture company remains unclear. Whether SAIC and Hongyan can achieve their respective goals through joint ventures is even more important. It is necessary to wait until the real "hands" are known.
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