Vienna The world’s largest manufacturer of commercial vehicles, Daimler Truck, is now also building its bestseller, the Actros semi-trailer tractor, in China. After years of preparation, the Swabian Dax group opened a new factory in the north of Beijing on Friday, which will initially employ around 1,300 people.
Daimler and its joint venture partner Foton Motor have invested the equivalent of half a billion euros in production on an area of more than 400,000 square meters. So far, the joint venture BFDA, in which both companies each hold half the shares, has only produced inexpensive trucks under the Auman brand locally.
Now Daimler Trucks finally wants to establish the main Mercedes-Benz logo across the board in China. “We are confident that we can really take off with the new product,” explained Karl Deppen, who is responsible for business in Asia on the Daimler Truck Board of Management. The Mercedes Actros is specially adapted to the needs of Chinese customers and is “the right product at the right time”.
The timing actually seems rather unfortunate. “The conditions are really not optimal right now,” states Stefan Bratzel, Director of the Center of Automotive Management (CAM). Due to the increasing geopolitical tensions between China and the West, the carmaker Opel canceled its planned expansion into the Middle Kingdom just a few days ago.
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The strict zero-Covid policy, which goes hand in hand with recurring lockdowns for metropolises of millions, is also stalling the economy. “China’s reputation as an investment location is eroding,” Jörg Wuttke, President of the European Chamber of Commerce in Beijing, recently warned. The second largest economy in the world is increasingly isolating itself and is experiencing weak growth.
Sales down 60 percent
In particular, the transport industry, which is heavily dependent on the economy, is suffering. After eight business months, only around 471,500 heavy trucks were newly registered in the People’s Republic, according to the trade publication “China Trucks”. This corresponds to a 60 percent drop in sales compared to the previous year.
“We don’t see any strong recovery for the third and fourth quarters either,” says Daimler manager Deppen. His industry is experiencing a difficult year with some “massive slumps” in China. Nevertheless, the former controller is “firmly convinced” that it makes sense to enter the market with the Actros right now.
“We see the need for transport and believe that we can offer added value there: greater efficiency, lower consumption and emissions,” emphasizes Deppen. In addition, China is the world’s largest market for heavy trucks. “Bigger than the US, Europe and Japan combined”.
His message is clear: Mercedes must have a stronger presence in the Far East, importing a few thousand vehicles a year is not enough. With the local production of the Actros, by far the Swabians’ best-selling articulated lorry, a new era is about to begin.
Deppen is tight-lipped about the planned quantities, but earlier statements from his colleagues give an idea of the dimensions in which Daimler Truck is thinking. The company, which has split off from the luxury car manufacturer Mercedes-Benz, originally wanted to launch the Actros in China by 2020 at the latest. Namely “with quantities in the five-digit range”, as ex-CEO Wolfgang Bernhard announced at the end of 2016.
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But Bernhard left Daimler Truck a little later. He was followed by Martin Daum, who has been CEO of the commercial vehicle manufacturer since then and who has taken it public. Under Daum, the market launch in China was postponed to 2022, but the goals remained ambitious. “One day, China could become our largest market for the Actros,” explained Daum almost two years ago. At the time, the manager predicted “considerable quantities” in the coming years.
What makes him so optimistic to this day is a fundamental change in the Chinese market for large long-distance trucks. Until a few years ago in the Far East, the purchase price was the main criterion for local forwarders and transport service providers when selecting fleet vehicles, but now the focus is also on the total operating costs.
Only diesel, no electric truck
The so-called Total Cost of Ownership (TCO) describes all the costs that are incurred over the course of the life cycle of a semitrailer tractor – from the purchase price to expenses for maintenance and service to fuel consumption. In the end, supposedly more expensive trucks can often be the more economical choice due to lower consumption engines and shorter downtimes due to less wear and tear.
In addition, the transport industry in China is becoming increasingly professional – also thanks to an ever better developed road network. Western providers now see their chance. In addition to Daimler Truck, the two Swedish rivals Volvo Trucks and Scania also want to start with their own production facilities for their brands in the People’s Republic by the end of the year.
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“Everyone hears the sales bells ringing, but the European manufacturers will need staying power,” believes CAM director Bratzel. “Business in China is like riding a razor blade at the moment.” The political influence is great. The car professor also criticizes the fact that Daimler Truck initially only wants to offer the Actros as a combustion engine and not as an electric one. “In a market like China, you also have to come up with new technologies, just coming with diesel is not enough.”
Daimler manager Deppen appeased. Even in China, the ultimate “hotspot” for zero-emission drives, more than nine out of ten articulated lorries with diesel engines are still being sold. The market is also very price-sensitive, says Holger Scherr, President and CEO of the Chinese Daimler joint venture BFDA. “We need to get a cost level where we can gain a foothold in the volume market in China.”
For this, the Swabians have greatly reduced the variance of the China Actros. While hauliers in Germany can mathematically choose from billions of different configuration options and hardly any truck that leaves the main plant in Wörth is the same as the previous one, Daimler Truck in China offers targeted package solutions.
“That’s the big difference,” says Scherr. “It helps us that we are more focused and have simpler processes.” In order to ramp up business in China, Daimler Truck selected and trained a total of 150 local suppliers. In addition, Mercedes will offer the China Actros for sale at more than 100 sales and service centers along the most important logistics routes in the country.
For comparison: In Australia, the Dax group has only half as many trading partners. This shows the great effort Daimler Truck puts into trying to be successful in the Far East.
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