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Grab the overseas market and upgrade the product to become the preferred choice
The crisis has quietly come before the rapidly developing Chinese bus industry.
Yesterday, at the 2008 World Bus Expo Asia Exhibition, the Shanghai Securities News learned that although China has become the world's largest passenger car producer, the passenger car company's net profit margin is extremely low, and 2% to 3% is a good performance. In the life-and-death option bus companies have to find another way out, or send troops overseas or increase the added value.
Yesterday, at the 2008 World Bus Expo Asia Exhibition held in Shanghai, Chinese and foreign bus companies and auto parts suppliers gathered. In the noisy exhibition scene, it is fully understood that Chinese bus companies are facing difficulties. When reporters interviewed senior executives of several small and medium bus companies, they learned that the Chinese bus industry is facing a crisis.
Lu Zhonghua, deputy general manager of Shenlong Bus Sales Company, told the Shanghai Securities News that “the gross profit margin of Chinese bus companies is extremely low, and reaching 2% is already very good.â€
In an interview with the Shanghai Securities News, Liu Liang, president of WABCO Automotive Systems Asia Pacific, pointed out that “China is the world’s largest passenger car producer.†WABCO’s majority of vehicle customers in China are commercial vehicle companies, especially Bus company.
“The sales volume of Golden Dragon Motors and Yutong Bus ranks first in the world, but the profitability of Chinese bus companies is indeed not high.†said Jia Jijiao, an analyst at the Pacific Securities R&D Department, “The third of 2007 from Jinlong Motors and Yutong Bus. The quarterly report shows that the net profit margins of Golden Dragon Motors and Yutong Bus are 12.89% and 14.77%, respectively, and their gross profit margins are between 3% and 4%, while other small passenger car companies have far lower gross profit margins. At this level, some companies are already on the verge of losing money."
In response to this crisis, many bus companies chose to export overseas or set up factories overseas.
The Shanghai Shenlong Bus, which was just established in September 2005, has already targeted markets such as the United States and Thailand. At present, Shenlong Bus has established an annual production capacity of 1,000 CKD assembly plants in Thailand to show its rapid occupation of the Thai passenger car market.
Jinlong Bus and Yutong Bus have not missed overseas markets. Yutong Bus signed an agreement with the Cuban government for the export of 5,348 buses. It is planned to be implemented in three years with a total amount of 370 million U.S. dollars. It is reported that this is an exclusive supply agreement. If the Cuban passenger car market is familiar with the Chinese passenger car brand, Yutong Motors will obtain an extremely favorable "monopoly" status.
"The main competitor of Chinese bus companies' exports is themselves." Lu Zhonghua pointed out that "everyone will fight a price war."
Yan Jijia further pointed out that "another overseas competitor of Chinese bus exports is used cars of Mercedes-Benz passenger cars, and the price of our products is even lower than these used cars."
At the same time as these enterprises competed for overseas markets, Jinlong Bus started its brand and technology upgrading journey. There are two main ways: First, to establish an alliance with European luxury passenger car company Scania, to produce luxury passenger cars in China, and to sell in China. The second is to launch their own brand of luxury RVs to enhance the brand image.
“We are allied with Jinlong Auto to use their bodywork and our chassis to produce Hager buses.†He Mochi, general manager of Scania (China) Sales Co., Ltd., told reporters, “In 2007 we began to enter the Chinese market.â€
At the exhibition, the reporter saw the ultra-luxury RV introduced by Jinlong Libby’s subsidiary. Ye Long, a director of Jinlong Limousine Company, told reporters, “This will be the self-owned brand owned by Golden Dragon Auto, and the most upmarket RV price will reach RMB 8 million. The export to overseas markets will not be ruled out in the future. This will help improve the overall quality of Jinlong Bus. Brand."