In accordance with the usual practice, Weichai Power, a listed company under the Weichai Group, a leading domestic engine and equipment company, recently issued its 2013 annual report. Thanks to the recovery of the heavy-duty truck industry, Weichai Power's 2013 annual report will still present a good performance report. Analysts also adjusted their ratings from a neutral “hold†to a more positive “recommendation†or “buy†last year.
However, Futian Automobile, a major customer of Weichai, will soon join forces with Cummins, the international engine giant, to create high-power engines, igniting the concerns of the industry about the future prospect of a prosperous Weichai Empire. After the heavy truck companies have embarked on the road of vertical integration and self-built engines, how long will the Weichai Empire flourish today?
Optimists believe that the engine entry barrier is high, and heavy-duty truck makers have more uncertainties in making their own engines. Weichai has not been easily shaken by its market position and leading edge in the heavy truck industry over the past 10 years. However, pessimists believe that Weichai’s current dominant position depends on the formation of market conditions in a specific period, rather than relying on technological leadership, and that the more stringent emission standards in countries and countries have contributed to a new wave of technology and product upgrades. It is easy to be marginalized on the non-dominant Weichai.
In the eyes of some people in the industry, even if Weichai is able to adjust itself in place, the law of industrial development determines that the brilliance of the Weichai Empire is unsustainable. “There are also few independent heavy-duty engine manufacturers in the world that survive.†said the person in charge of a heavy-duty truck company who declined to be named.
Heavy truck customer churn risk <br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br Provides a light engine.
As the company with the largest sales volume of commercial vehicles in China and ranked fourth in heavy truck sales, Foton is one of Weichai's major customers. According to statistics, Weichai once occupied 80% of Foton heavy truck products. However, since the launch of the high-end heavy-duty Auman GTL in 2010, Foton started to use the Cummins engine. Weichai’s dominance has been changed.
Foton teamed up with Cummins to build a large-horsepower engine. Weichai's heavy-duty engine was once again placed in the loss of important customers. The above-mentioned person in charge of heavy-duty trucks even pessimistically predicted that after losing Foton, there would be no more high-quality customers in Weichai Power's heavy truck industry customers.
Heavy truck engines are the main source of profit for Weichai Power. When the heavy-duty truck industry was hot in 2010, the sales of Weichai Power Heavy truck engines reached 411,000 units, and the construction machinery engines reached 141,000 units. In recent years, the heavy-duty truck industry has weakened. Weichai's heavy-duty truck engine sales have fallen, but it is still a big one. In 2012, Weichai sold 207.5 million heavy truck engines and 62,600 units of construction machinery engines.
After the separation of Weichai Power and CNHTC (000951) in 2005, its major customers in the heavy truck industry became Fukuda, Shaanxi Heavy Duty Truck and FAW, while the rest were small and medium-sized heavy truck companies such as JAC and Hualing. In 2005, Weichai purchased the Hunan Torch Assets, collected revenue from Shaanxi Zhongqi and Shaanxi Fast, and became the largest shareholder, creating a heavy truck gold industrial chain that includes vehicles and key components. However, the Shaanxi local government supports Shaanxi Heavy Duty Trucks to get rid of Weichai, and the idea of ​​independent development has a long history. In recent years, the Shaanxi government has been actively promoting the listing of Shaanxi Automobile Group, the second largest shareholder of Shaanxi Heavy Duty Truck and Shaanxi Fast, and Shaanxi Automobile Group has established a joint venture with Cummins to establish Xi'an Cummins Engine Corporation. The risk of firewood has always existed.
According to Li Ziliang, consulting director of Zero Research Group Automotive Research Center, with the heavy truck companies building their own engines, Weichai’s future development faces high risks. “The heavy truck companies in the domestic first and second tier have already completed the layout of the engine industry chain. The market share of Weichai’s heavy truck engines has fallen from 40% in 2010 to around 33% in 2012.â€