Long-Distance Road Trip

By LIU YUNYUN

Long-Distance Road Trip

By LIU YUNYUN

Chinese automaker Foton sets up its European manufacturing headquarters in Russia with hopes of selling cars overseas

Beiqi Foton Motor Co. Ltd., a leading light commercial vehicle producer in China, is on the road to overseas markets—and it’s starting this journey in Russia.

Foton, a subsidiary of state-owned Beijing Automotive Industry Holding Co., signed an agreement on June 24 with the municipal government of Moscow.Guo Jinlong, Mayor of Beijing, and Yury Luzhkov, Mayor of Moscow, were present for the signing.

Foton’s European Division Department,also known as Russia Foton, was also officially launched that day.

Construction of production facilities in Russia will begin by the end of 2010, and Russia Foton will also be responsible for marketing, research and development, and investment management of the brand in Europe. By 2012, Foton will manage an annual output of 100,000 units, including light and heavy-duty trucks, commercial vehicles,pickups, vans and SUVs for the European market.

Eventually, Russia will become Foton’s primary production and operation center in Europe. The foothold in Russia is a milestone in the company’s overseas development strategy.

Foton became the biggest producer of commercial vehicles in China in the fi rst fi ve months of this year.

Beiqi Foton, founded in August 1996, is one of China’s largest automakers. Ranking 43rd in the top 500 most valuable Chinese brands, the company exports vehicles to Southern Asia, North Africa and the Persian Gulf region. With 28,000 employees nationwide, the company has also established research and development branches in Japan,Germany and Taiwan.

Going global

“Foton will invest in Russia in a strategic and orderly way. We’re looking at long-term cooperation instead of shortterm speculation,” said Foton’s General Manager Wang Jinyu.

Foton vehicles drove into the Russian market in 2005. By the end of 2008, Foton had sold more than 10,000 commercial vehicles there and had since started investigating the possibility of setting up a factory in Russia.

“Since Foton is not the first Chinese automaker to start marketing abroad, we might not be the best performing producer in Russia,” said Dong Haiyang, former deputy general manager of Foton in charge of overseas development.

But Dong emphasized that Foton had succeeded in developing certified models and building up partnerships, and believed that Foton would continue to fl ourish in the future.

Foton will purchase necessary materials and produce the vehicles locally. It will also employ local staff. Dong said among the initial 36 employees preparing to establish the manufacturing base, only seven are Chinese,and four of the nine management board members are locals.

The expansion is part of Foton’s 2011-15 plan. The automaker plans to build factories in fi ve countries including Russia,Brazil, Mexico, India and Thailand by 2015,and in the meantime it is exploring markets in developed countries like EU members, the United States and Japan.

Dong explained why his company chose to locate its European headquarters in Russia.

“Prior to the 2008 fi nancial crisis, Russia had been the biggest overseas market for Chinese automakers and we should retain the market share,” Dong said.

Dong added Foton’s expansion efforts in other countries have also started. It has set up a department dedicated to investigating the possibility of investing, designing and recruiting in India.

LU JINBO

BIG GREEN BUS: One of the two hybrid buses presented by Foton as a gift to Moscow at the signing ceremony. The bus, which consumes less gasoline and has lower emissions,is greener than traditional buses

Designating Russia, as well as Eastern Europe, as its markets with great potential,Foton will be patient while waiting for the markets to well grow, Dong noted.

Green gift

At the signing ceremony in late June,Foton donated two Foton hybrid buses worth$440,000 to Moscow, both reaching the Euro V, the widely applied emission standards across Europe.

The high emission-control standard has been a harsh condition for Chinese automakers, as they have encountered protectionism of all kinds.

The donated hybrid model consumes 29.5 liters of gasoline per 100 km, a drop of about 30 percent compared with traditional buses. Nitrogen dioxide emission is 40 percent less and particulate emission is down 30 percent. About 1,000 of these vehicles serve Beijing commuters.

By the end of 2009, Foton had invested 5 billion yuan ($732 million) in the research,development and production of new energy vehicles, such as vehicles powered by hybrid, fuel cell and natural gas, and plug-in hybrid electric vehicles.

Foton has an annual capacity to produce 5,000 new energy vehicles and 400,000 highly ef fi cient energy-saving engines.

Difficulties

A number of other Chinese automakers that have already started overseas expansion efforts are facing numerous roadblocks.

Each country Foton wishes to sell its vehicles in has a unique automobile standard and national condition. For instance, the paint in buses sold to the United States may not contain lead; those exported to Russia must have solid designs and be extremely durable; oil tanks exported to Australia must use aluminum alloy; and vehicles sold to North Africa should have special tires since road conditions there are less than ideal for easy transportation.

Zhong Shi, an independent auto analyst, said it is not the right time for Chinese automakers to go abroad, because China is the most important auto market in the world right now. The manufacturers, said Zhong, should tap the great potential of the domestic market rather than making the hasty decision to sell vehicles in developed markets like Europe.