Chinese firms keep on trucking in Africa

China's truck manufacturers have succeeded in supplying the brawn the fast-growing continent needs

Chinese companies have had success in selling commercial vehicles in Africa and adapting to the vagaries of the market, though occasionally that success is spotlighted in an unintended way.

Shortly before the outbreak of Libya's civil war in early 2011, Hebei Zhongxing Automobile Co of Baoding got an order for 6,000 trucks, the largest overseas vehicle order that year among China's truck makers. It was a proud moment for the small producer of SUVs and pickup trucks that uses the ZX Auto brand.

Many of the 6,000 ZX Auto Grand Tiger pickups, as well as Toyota pickups, were used in the fighting by the rebels, who mounted heavy guns on the truck beds. Pro-Gadhafi forces also began using the pickups, and pictures of the modified war wagons started showing up on the Internet.

Company leaders say they aren't proud of the unintended use, but they are happy that ZX Auto products are believed to be tough enough to brave bullets.

The company, headquartered 150 kilometers from Beijing, started exporting 20 years ago. In 2009, it established a plant in Iran to supply the Middle East and African markets.

In Africa, most trucks are imported for infrastructure projects. In developed areas such as Europe and North America, the demand for trucks seldom surges because most big projects already are finished. Even demand in China has slowed.

But in Africa, many roads, railways, buildings and even city water supply systems are just being built, so demand has been very high for trucks from China and other nations.

A number of Chinese companies have been serving the market.

Anhui Jianghuai Automobile Co Ltd, known as JAC Motors, exported 600 trucks and vans to Algeria and South Africa in February. The company is a Chinese state-owned automobile and commercial vehicle manufacturer based in Hefei, Anhui province.

In March, China National Heavy Duty Truck Group Co exported 10 tractors and 10 oil tanker trucks to Nigeria. The company, known as Sinotruk Group, is a state-owned enterprise headquartered in Jinan, Shandong province. It got the order at the Canton Fair in 2013. In June, it got another order for 103 trucks from Algeria.

While those orders may seem relatively small, many of the trucks and machines sold are costly, which means the contract value is much higher than for passenger cars. Three heavy-duty trucks that BeiBen Truck exported to Uganda last year had a total value of $115,000.

Since 2006 BeiBen, based in Baotou in the Inner Mongolia autonomous region, has exported more than 1,000 trucks to Algeria, making it the company's largest market in North Africa.

BeiBen, part of the North Industries Group Corp, was founded in 1988 when it signed an agreement with Daimler-Benz to manufacture Mercedes-Benz trucks. It has developed its own brands and it's not uncommon to see both kinds of trucks on construction sites in Russia, Southeast Asia and Africa.

A lack of railroads in some parts of Africa also creates opportunities for Chinese truck makers. Out of the 54 African countries, 13 still have no railways, so road transportation is the only option.

Guinea-Bissau has no railroads. Of the country's 4,400 km of roads, only 550 km are asphalt and the others mostly sand. So it needs trucks for transportation, but also needs heavy trucks and machinery to improve its roads.

Comercial Santy, a Guinea-based company with businesses that include providing vehicles for construction projects, bought 20 trucks this year from Chinese truck maker CAMC. The Chinese company, Anhui Hualing Automobile Co Ltd, known as CAMC, makes heavy-duty trucks.

Santy says the company has two favorite brands - Daimler and CAMC. That helps cut costs since the Chinese trucks are much cheaper and have proved their value, according to Santy officials.

The African market also means a fresh start for many truck makers in China: Some manufacturers, such as C&C, based in Wuhu, Anhui province, are not well known at home but are flourishing overseas.

Export markets vary across Africa, and North Africa has been the best market for most Chinese truck makers. Almost all Chinese truck makers do business in Algeria.

The biggest exporter to Algeria is China National Heavy Duty Truck, with deliveries of about 1,000 trucks every year with a value of $40 million.

Even in this market, however, things have gotten tougher as competition has increased.

So many European and Chinese vehicles have flooded into Algeria that the government is restricting vehicle imports.

The North African market is saturated with Chinese truck brands, so the competition is brutal and the profit margins are low. Some companies are exploring new territories in sub-Saharan countries, and fast-developing regions such as eastern, western and southern Africa look promising.

Recently, China National Heavy Duty Truck teamed up with Dongyue Special-purpose Automobile Manufacturing Co of Jining, in Shandong province, to explore the Mozambique market, where GDP has grown by an annual average of about 8 percent in the past five years. By August, they had found a local dealer and the first vehicles are to be delivered soon.

China National Heavy Duty Truck also delivers a total of around 700 trucks annually to Benin, Burkina Faso, Cote d'Ivoire, Guinea, Senegal and Niger.

Chinese truck makers use two major ways to sell trucks in Africa: through local dealers or Chinese construction and logistics companies working in the continent.

China National Heavy Duty Truck, for example, has built a good relationship with Chinese companies in Mauritania and Chad, which translates into orders totaling 80 trucks every year from the two countries. As is typical among Chinese, these companies introduce more Chinese potential clients to the truck company, and their orders grow.

Shaanxi Automobile Group, a Chinese bus and truck manufacturer headquartered in Xi'an, is also capitalizing on Chinese construction and equipment companies. In November 2013, it signed an agreement with Beijing-based AVIC Intl Project Engineering Company in Kenya to deliver 109 trucks.

Besides competition, the difficulties in Africa include more vulnerability to policy changes and social instability than other overseas markets such as Southeast Asia, industry sources say.

China National Heavy Duty Truck used to export more than 100 trucks a year to Mali, in West Africa, but that ended after armed conflict with separatist and Islamic rebels broke out in January 2012. Companies found their business prospects curtailed in Tunisia after that country introduced a quota system for vehicle imports. Instability in several North African countries in recent years further hurt the sales of Chinese truck companies, some of which built plants in the region.

Liu Hanru, president of CAMC, says Chinese trucks have two major hurdles when going overseas. First, the Chinese yuan has appreciated, reducing the price competitiveness of Chinese vehicles; second, competition among Chinese companies has grown so vicious that profit margins are significantly cut.

Poor after-sales service also has hurt the expansion of Chinese truck companies, he adds.

"Many think they finished the job after they sell trucks, but pay little attention to serving the customers. By contrast, international brands such as Daimler offer transportation solutions so customers tend to buy them even if they are more expensive."

Some companies have realized the problem and tried to tackle it. China National Heavy Duty Truck has sent nearly 40 after-sales specialists to overseas companies to help improve services. Before they go, their knowledge, skills and language abilities are tested.

And last year, China National Heavy Duty Truck Nigeria held a training session with local dealers on safe driving and maintenance.

wangchao@chinadaily.com.cn

(China Daily Africa Weekly 09/19/2014 page8)