Changan Automobile's close-knit commercial vehicle business expansion

Just signed a cooperation agreement with the French Peugeot Citroen Group (PSA), Changan Automobile (000625, shares it) also aimed at Europe's largest car company - Volkswagen. Yesterday, an insider of the Chang’an Group stated to the “First Financial Daily” that “it was talking to Volkswagen but it had no result”.
Since the end of 2009, Changan Automobile has been active in business expansion. Since the acquisition of Changhe, Hafei and other automobile assets under the new CNAC in November 2009, Changan Automobile will set up joint ventures with Mazda and PSA this year.
“In the past, the Group's business was heavy autonomy (brand), and the joint venture was much weaker, but now we hope to be able to walk on two legs and not be lame,” said the Changan Group.
Chang'an Automobile's joint venture was discussed by Changan Automobile and Volkswagen as a commercial vehicle. The most likely way is to establish a joint venture between the two parties and introduce Volkswagen’s commercial vehicle models to production and sales in China. Volkswagen currently owns the Volkswagen brand commercial vehicle and holds the shares of Scania, a commercial vehicle and bus manufacturer in Sweden, and two commercial vehicle companies in Mann, Germany.
In March of this year, the chairman of Volkswagen and Mann has said that Volkswagen-Scania-Man will form a three-party strategic alliance to share parts and technology.
The commercial vehicles of Chang'an Automobile are mainly small trucks under the Changan mini-car brand, JMC brand light commercial vehicles, passenger cars and construction vehicles. "Our commercial vehicles have always been low-end, if you really cooperate with the public, you can expand the market." The insider said.
From the perspective of sales volume, in 2009, Changan Automobile sold a total of 1.863 million cars, lagging behind Dongfeng Motor (600006, stocks) and FAW Group with a slight advantage. In the first quarter of this year, Changan Automobile sold a total of 691,000 vehicles, which surpassed Dongfeng Motor and FAW Group. However, in terms of profit and sales, Changan Automobile, with a relatively large sales volume, is far behind Dongfeng and FAW.
An analysis report of the China Association of Automobile Manufacturers pointed out that in 2009, Dongfeng Motor had sales of 268.524 billion yuan and net profit of 26.258 billion yuan. During the same period, FAW Group’s sales were 314.381 billion yuan and net profit was 25.862 billion yuan. Chang'an Automobile had sales of only 105.42 billion yuan, and net profit of 2.383 billion yuan. Net profit was less than one-tenth that of Dongfeng and FAW.
"Now to make a joint venture this joint venture, because of the loss of the joint venture, the profits are much worse than the other three." An inside Changan Group admits.
On May 4th this year, Changan Automobile and French PSA signed a letter of intent to establish a joint venture to produce and sell passenger cars and commercial vehicles under PSA. At the same time, Changan Automobile also plans to establish a 50:50 joint venture with Mazda. If the successful joint-venture of commercial vehicles under negotiation is successful, together with existing Changan Suzuki and Changan Ford, the number of Chang'an Automobile future passenger car joint ventures is expected to reach five.
Volkswagen's layout of commercial vehicles in China With the joint venture between Shanghai Volkswagen and FAW-Volkswagen, Volkswagen has become the largest foreign-owned company in China with the largest sales volume of passenger vehicles. In 2009, Volkswagen sold a total of 1.118 million cars in China, accounting for one-sixth of its global sales. Compared with the downturn in Europe and North America, Chinese car consumption is like installing a car engine. In 2009, China's auto sales reached 13.64 million units, an increase of 46.15% year-on-year, making it the world's largest auto market.
Against this background, Volkswagen announced that it will invest more than 4 billion euros (about 34.68 billion yuan) in China in 2010-2012. The investment will be used for the expansion of the Nanjing plant and the Chengdu plant, as well as new product investment plans.
In addition to passenger cars, commercial vehicles in China have also performed strongly. In 2009, the sales volume of commercial vehicles in China reached 3,133,500 units, a year-on-year increase of 28.39%, making it the world's largest commercial vehicle market. In 2009, the sales volume of commercial vehicles in China was close to the total sales volume of all types of vehicles in Japan during the same period.
In contrast, the situation of commercial vehicle companies in Europe is somewhat bleak. In 2009, Volkswagen sold a total of 348,800 light commercial vehicles worldwide, a 20.7% drop from the 448,200 units in 2008.
The German Mann and Volvo trucks have also experienced different degrees of decline. This situation has led to unprecedented strength of China's commercial vehicle companies. In 2009, Foton Motor Co. sold 600,200 commercial vehicles, which surpassed Daimler to become the world's largest Big commercial vehicle brand.
“The commercial vehicle business of the masses is not currently introduced into the Chinese market. If domestic classification and production standards are followed, the production and sales of commercial vehicles in the country will be almost zero,” Yang Meihong, vice president of Volkswagen China, said in an interview earlier.
In fact, due to the booming of passenger cars and commercial vehicles in China, global automobile companies have formulated strategies to enter the two markets of passenger vehicles and commercial vehicles in China. Toyota Coust is the earliest joint venture sample of foreign-invested commercial vehicles. In 2009, Coster sold 5,000 vehicles in China, which dominated the high-end minivan market in China. Nissan also started a commercial vehicle strategy in China, introducing light trucks, minivans, and other models in China. Although the Fiat sedan disappeared in China, its commercial vehicle Iveco sold 87,000 vehicles in China in 2009.
"This is not the latest news, but it will be a trend." Gasgoo.com president Chen Wenkai told reporters earlier. Guo Zhenlu, general manager of Zhengzhou Nissan also said: "No foreign investment will be willing to enter the passenger car market."

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