The China hustle

The beginning of 2020 saw China and the US sign an economic, trade agreement where both parties have reached the consensus that the US will fulfil its commitment to phase out additional tariffs on Chinese products, so as to achieve a switch from hiking toc cutting additional tariffs. On one hand, according to CIMC Vehicles, the OEM will pay close attention to the negotiation of the China-US phase two economic and trade agreement and prepare appropriate business strategy for the possible relaxation of economic and trade relations. On the other hand, though, CIMC plans to promote the construction of refrigerated semi-trailer plants and container chassis facilities across North America.

In January 2020, with the spread of Covid-19 worldwide, it goes without saying that the pandemic has caused obvious impacts on economic activities in China and even the world. For Chinese government to drive domestic demand, “New Infrastructure Construction” has become an important starting point for economic growth in 2020. Recently, various regions of China have launched huge investment plans with total investment of over 20 trillion RMB, of which nearly 3.5 trillion RMB worth of investments will be completed in 2020. The OEM expects truck bodies for specialty vehicles, dump trucks and agitator trucks will experience a continuous rise.

At the end of April 2020, the Security Committee under the State Council of China issued a three-year action plan for special remediation of national work safety, pursuant to which part of the tasks for transportation safety remediation involved in the special action has promoted the compliance process of illegally modified vehicles.

With the deepening of the special remediation of 100-tonne vehicles – the illegal modification of trucks, the large-tonnage trucks with small-tonne tags and other violations of laws and regulations will basically be eliminated in 2022. China will reportedly strengthen the safety management of road transportation of dangerous goods, with focus on the rectification of violation acts such as non-compliant tankers carrying liquid dangerous goods and illegal transportation with entrainment. According to the requirements of GB1589-2016 and GB7258-2017 Conditions for Operation Safety of Motor Vehicles, such requirements will further stimulate the replacement of non-compliant vehicles in China’s semi-trailer market. The in-depth implementation of highway safety and life protection projects will bring growth in infrastructure, which will especially bring new growth for the market of specialty vehicles such as construction vehicles, dump trucks and mixer trucks. The new market demand will stimulate the business growth and development of CIMC Vehicles.

As for company finances, CIMC Vehicles reported satisfactory sales volumes of domestic semi-trailers and truck bodies for specialty vehicles in Q2 2020. A larger order volume, Li said, included domestic enterprises. For example, its domestic enterprises successively signed orders with Huizhou GHT (惠州广和通) for 1,000 truck body products of dump trucks, and with Jiangji Chexiang (江集车厢) for 1,500 chassis trailers. Meanwhile, with the construction of new infrastructure, the product lines of CIMC Vehicles will also develop towards intelligent networking, including four directions namely intelligence, networking, modular and sharing. In the future, development of CIMC Vehicles’ products will be based on the application of 5G and IoT technology, which can realise remote diagnosis. When a failure of vehicle occurs, it will be automatically reflected to the platform to establish a connection and form a solution. In the Meantime, the feedback based big data is expected to realise the repeated calculation of vehicle products, which will achieve more intelligent operation of vehicles and networking of products.

With the increasing weight of service industries in GDP, the fresh food logistics industry in China is also entering into a long-term growth trend. The Ministry of Transport in China recently issued the notice on further improving the highway vehicles toll and extending the highway fee concession for fresh agricultural products transportation. On the other hand, the National Development and Reform Commission released the list of national backbone cold chain logistics base construction in 2020, further strengthening the transformation of cold chain logistics facilities and equipment, promoting the innovation of business process and business model, and constantly improving the service capacity and efficiency of cold chain logistics. These will fundamentally boost the domestic demand for refrigerated trucks and refrigerated trailers. After the spread of Covid-19, the application of relevant favourable policies as well as the accelerated construction of cold chain logistics bases in China, demand for fresh food delivery to home has ignited demand for refrigerated van trailers.

In an executive interview with Global Trailer, CIMC Vehicles President and CEO, David Li, details what it takes to be the world’s top trailer builder from coordinating group-wide transformation to overhauling China’s second generation of semi-trailers to make way for innovative, safer and more productive equipment.

Q: Is CIMC Vehicles’ plan to establish 14 ‘Light Tower’ or lighthouse plants by 2025 on track?
A: We have commenced preparation for building ‘Light Tower’ plants since 2014 for upgrading traditional plants to automated manufacturing plants and building our core competitiveness through technology upgrades. As of 2019, we have built 12 ‘Light Tower’ plants for semi-trailers around the world, including five Light Tower plants for truck bodies of specialty vehicles in China and two ‘Light Tower’ plants for bodies of refrigerated van trucks in China. Our Light Tower plants are the first to launch the concept of ‘manufacturing trailers with car manufacturing techniques’ has formed a ‘high-end manufacturing system’ with initial scale. We have realised this upgrade from traditional labour-intensive plants to modern environment-friendly plants which enable our products to be more competitive with higher quality and price advantages among similar products in the world.
The Light Tower plants have features such as adopting high precision feeding and shaping devices, using automated welding or robotic welding, adopting KTL with high automation and low VOCs emission, as well as robot-controlled powder coating system, paced assembly line and digitalised warehouses. The transfer into Light Tower plants is beneficial to enhancing efficiency, improving product quality and contributing to the ecological environment.
In the future, with focus on the objective of comprehensive transformation towards high-end manufacturing systems, we will regard upgrading product modules, improving Light Tower plants, launching marketing reform and promoting organisation development as our core measures for enhancing the long-term competitive strength of the organisation. In China, we are planning to continuously improve the existing nine Light Tower plants, build two new Light Tower plants for truck bodies of specialty vehicles, and build a new Light Tower plant for refrigerated truck and trailers. Meanwhile, we will set up an assembly plant for refrigerated semi-trailers in Sarnia, Ontario of Canada; build an automated production facility for refrigerated trailers in Monon, Indiana, US; build automated production facilities for container chassis trailers in Emporia, Virginia, and South Gate, California; and set up production plants for container chassis trailers in Southampton of England and Pijnacker of the Netherlands.
We believe that with the gradual improvement in manufacturing capacity of our Light Tower plants in China and the continuous deepening of our business philosophy of  ‘Inter-continental Operation, Local Manufacturing’, we will give full play to our competitive advantages in global supply chain, global high-end manufacturing system, cross-over design and inter-continental production.

Q: What are the main challenges and opportunities for CIMC with the implementation of this ‘intelligent upgrade’ across the business?
A: In the course of transformation and upgrade towards ‘intelligent manufacturing’, product module design, product focus, product profitability and brand competitiveness are all important goals for breakthrough of our smart transformation.
Facing such challenges, the group has made strategic planning with focus on stable operation and quality growth, and will develop an integrated business model of ‘Manufacturing + Services + Finance’ based on high-end manufacturing system, so as to promote transformation and upgrade of ‘intelligent manufacturing’, optimise allocation of resources and talents, and ensure our competitiveness in the industry.
In 2019, CIMC Group accelerated the transformation and upgrade of intelligent manufacturing and implemented the strategy of integrating industrialisation and informatisation. Levering technologies such as IoT and big data, the pilot manufacturing plants of CIMC Vehicles implemented the Light Tower Plan in an orderly manner, which helped enterprises reduce costs, enhance efficiency and shorten delivery time while building a green and friendly environment for safe production.
In addition, CIMC Vehicles intensified efforts in product research and development, with over 900 authorised patents obtained worldwide. Furthermore, we continued to explore innovative business models and technologies. We have established a trailer-renting project and launched IoT technologies and systems for intelligent trailers, so as to achieve intelligent, visual and timing management of trailers and cargoes for our customers, realising the lowest operating cost, the best operating efficiency and the most secured operation safety, and ultimately improving efficiency of logistics transportation and promoting the development of intelligent transportation as well as the intelligent semi-trailer industry.

Q: CIMC Vehicles signed cooperation agreements with Antai College of Economics and Management (ACEM), Shanghai Jiao Tong University, and MIT (USA) to recruit suitable persons externally. The CIMC Vehicles has also officially become a partner in the MBA program of the ‘China Leaders for Global Operations (CLGO)’ initiative. Do you have any comments to share about these arrangements?
A: Innovation-driven and talent-oriented. As a global multinational company driven by the wave of global digitisation, we focus on the future based on our current conditions to establish an innovative talent development mechanism in the hope to attract more excellent talents worldwide to join us for mutual growth. Our cooperation with reputable universities highlights a solid step towards talent development and intelligent application.
CIMC Vehicles has signed cooperation agreements with Antai College of Economics and Management (ACEM), Shanghai Jiao Tong University, and MIT (USA) to recruit excellent candidates with potentials, reflecting that CIMC Vehicles attaches more significance to integrated talents with both business management as well as science and engineering backgrounds. We have recruited talents to our enterprises successively through launching the ‘2025’ and the ‘Global Operation’ talent development plans. Our new recruits can improve their technical capabilities in actual projects and can quickly achieve enhanced leadership through trainings on communication and management. We will strive to cultivate core technical talents to usher the development of Industry 4.0 and act as leaders in our global operation strategy.

Q: CIMC Vehicles was the first semi-trailer manufacturer to be listed on the main board of the Stock Exchange of Hong Kong Limited (HKEX) on 11 July 2019. Can you elanorate on this development and what it means for CIMC Vehicles’ future?
A: On 11 July 2019, CIMC Vehicles successfully listed on the main board of the Hong Kong Stock Exchange and became the first semi-trailer manufacturer in the Hong Kong stock market. It is the fourth independent listing platform of CIMC Group and its listing represents a milestone for the rise of China’s semi-trailer industry. Currently, we have also initiated the plan for listing on the A-share market. If successful, CIMC Vehicles will become the first semi-trailer manufacturing company listing on both the A-Share market and H-Share market in the world.
The listing of CIMC Vehicles means that: (i) the company can further optimise and improve its corporate governance structure and enhance its overall governance after its listing; (ii) we can make full use of the financing channels of this market to attract more domestic high-quality investors, which will facilitate continuous enhancement of our core competitiveness; (iii) the successful landing of CIMC Vehicles in the capital market will further accelerate our strategic layout, promote our product module upgrade and enhance our capital advantages in core strategic measures including improving Light Tower plants, and expand our scale effect; and (iv) in terms of the industry, the listing of CIMC Vehicles as a leader in the semi-trailer industry will facilitate more comprehensive knowledge and understanding of the capital market on the semi-trailer industry. Finally, the listing of CIMC Vehicles is conducive to attracting more talents with global visions to join our management and R&D teams, thus constantly enhancing the core competitiveness of our brand in terms of R&D design, product marketing and value-added services, hence providing more diversified products and services for our customers and creating maximum value for our shareholders.
On 25 March 2020, CIMC Vehicles published its first annual results report, according to which the Company achieved steady growth in overall results with revenue of 23.22 billion RMB. In 2019, the Company recorded net profit of 1.33 billion RMB, increasing by 7.7 per cent year-on-year, and profit attributable to owners of 1.21 billion RMB, increasing by 5.9 per cent year-on-year. The Board of Directors recommended the payment of a final dividend of 0.45 RMB per share for the year ended 31 December 2019.

Q: What is the Trailer G20 ‘China Trailer High-Quality Development Joint Conference’ which was established in July 2019? Who were the main participants? How does this group set new standards and promote development?
A: On 31 July 2019, the first China Trailer High-Quality Development Joint Conference (Joint Conference, also known as Trailer G20) was established in Shenzhen. The first batch of Trailer G20 members consists of 20 major domestic trailer manufacturers including CIMC Tonghua, CIMC Huajun, Shandong Luoxiang, Anhui Kaile, Dongguan Yongqiang, Hunan SNTO, Liangshan Tongya and Liaoning Gold Tianma.
In recent years, the trailer market has been reshaping with the implementation of relevant standards and regulations in China. The trailer industry is about to enter a period with historical opportunities for the upgrade of second-generation products following the major industrial development trend of enhancing configuration, promoting transformation and development as well as improving quality and efficiency.
Against this background, CIMC Vehicles initiated the establishment of Trailer G20 which is committed to building an ecosystem for the healthy and high-quality development of trailers in China. Trailer G20 aims to promote the healthy development of the industry through legal operation, sharing resources, enhancing self-discipline and cooperative development, hence seeking a new path for the high-quality development of trailers in China.

Q: At the 2019 China International Commercial Vehicle Expo, you talked about special purpose vehicles and called on government regulators to continue to strengthen joint law enforcement in a bid to crack down on overloading in the road transport industry. Do you have anything further to add on this?
A: At present, there is still significant gap in launching new products between the trailer industry in China and those in developed countries in Europe and the United States. The trailer industry in China is generally characterised by ‘overrunning and overloading’, and the industry on the whole is in a state of atomic competition with uneven quality and low concentration of competition.
China’s first-generation semi-trailer standards have significantly affected the development of the entire road transportation, and China’s semi-trailer industry is undergoing a second-generation upgrade. In 2016, China officially launched the GB1589-2016 standard, which represents the second-generation national standard for China’s semi-trailer industry. In 2017, in a bid to clarify the guidance of GB1589-2016 over the semi-trailer industry, relevant ministries and agencies of China issued GB7258-2017 for the running gear system and safety devices of semi-trailers. The GB7258-2017 standard is highly similar to the standards and practices of the EU, laying a foundation for guiding the upgrade of China’s semi-trailer industry to the European level as well as for the going global of tractors and semi-trailers made in China.
For a long time, the manufacturing enterprises in China’s semi-trailer industry has been in urgent need for upgrading, and the market is still in disordered competition. According to data from China Specialty Vehicle Association, there are over 1,600 specialty vehicle and trailer companies including 1,362 companies in production, as reported in China. Sustainable development is the key for semi-trailer and specialty vehicle companies in China to complete market transformation and upgrading. With the new national standard of second-generation semi-trailers (GB1589- 2016, GB7258-2017) coming into force in 2020, the 17.5 metres long flatbed trailers and over-length fence trailers which are dominating most of China’s long-distance road transport market will be replaced by compliant van trailers and curtain-side trailers. Given the vast number of this type of semi-trailers, it will take three to four years to complete the replacement by our estimation. In addition, demand for refrigerated trailers for long-distance cold chain transportation will climb up quickly, and large refrigerated vans trailer will completely replace illegally modified second- hand shipping refrigerated containers and further stimulate market demand.
In line with the new standards, we ought to produce high-quality second-generation semi-trailer products, and drive steady growth of the Company’s performance through upgrading product modules, improving Light Tower plants, launching a marketing transformation as well as promoting organisation development, so as to continuously improve and enhance our core competitiveness. In an era of second-generation semi-trailers in China, we will continue to lead the specialty vehicle industry so that the world will be more confident in the positive and optimistic development and prospects of China’s semi-trailer market.

Q: Do you have any comments about CIMC Vehicles’ push into the global special-purpose vehicle market?
A: The changing global situation is constantly affecting CIMC Vehicles’ production and operation models in overseas markets. The Sino-US trade war in particular, coupled with the Covid-19 pandemic, has brought a heavy blow to the global economy and further undermined the resumption and recovery of the economy. The production model of exporting products made in Chinese plants and assembled overseas under the former inter-continental production model are under certain tax pressures, so that the splitting mode of exports is set to become the response measure taken by enterprises.
On the basis of ‘Global Operation, Local Knowledge’, we have upgraded to the business philosophy of ‘Inter-continental Operation, Local Manufacturing’, while the overseas plants of the company have changed from ‘Inter-continental Manufacturing’ to ‘Local Manufacturing’. Our overseas production plants will implement relatively independent production and operation strategies. Overseas plants will independently carry out procurement of raw materials, production and operation arrangements and sales according to their own production and operation plans. As for overseas assembly plants, the headquarters of the company will formulate the overall production and operation plan, and overseas assembly plants will be responsible for actual implementation. The domestic production plants will manufacture corresponding modular products and ship such products to overseas assembly plants for assembly, while overseas assembly plants will be only responsible for product assembly and external sales.
To cope with the new global situation, we will accelerate the modular design of products and the construction of Light Tower plants. CIMC Vehicles has owned production plants and assembly plants in eight countries including the US, the UK and Belgium. Our products cover major regions including China, North America and Europe, for which we have established supporting sales networks. In the overseas markets, we have successfully acquired several well-known brands such as Vanguard, SDC and LAG. Relying on our design process and production experience in common product portfolios in such regions, we have achieved significant strategic synergies.

Q: At the 2019 China International Commercial Vehicle Expo, CIMC Vehicles the unveiling of two lightweight environmentally friendly ’Second Generation Semi-Trailer’ models as well as upgraded versions of classic trailers including an Australian 13.6m curtainsider. Are there any specific trailer models in development or coming soon that you would like to talk about?
A: At the Expo, such 13.6m curtain-side trailer attracted a lot of attention and was called “the best trailer in China” by European consumers. Its body boosts lightweight design and highlighting powder coating process. The trailer is equipped with a wind deflector, sliding roof and fences on both sides which can reduce wind resistance and fuel consumption. It also uses 30mm composite wood floor with European standards, which is anti-skid, wear-resistant and easy to maintain. The newly configured curtain with European standards is smooth and aesthetic.
Currently, we are actively developing and upgrading the product modules of second-generation semi-trailers. Such product modules are based on compliant size and compliant load and are suitable for high speed driving with high horsepower tractor. Moreover, the vehicle is characterised by light weight, high configuration, long life, and less maintenance, which can not only meet requirements of product upgrading in the Chinese market, but also can be directly sold in emerging markets.
With the implementation of the second-generation national standard GB1589-2016 for China’s semi-trailer industry, the size standards of China’s second-generation semi-trailers are similar to European standards which are commonly used for curtain-side semi-trailers in Europe. In the future, we will also launch more lightweight vans and curtain-side semi-trailers that comply with China’s second-generation national standards to meet growing market demands. At present, CIMC Vehicles has launched the International Version of vehicles series based on the business philosophy of ‘Global Operation’, which have passed the strict testing of major markets in the North America. This has not only further shined the brand of ‘Made in China’, but also greatly boosted the confidence for Chinese specialty vehicle brands to participate in global competitions.

Q: Are there any trends in manufacturing that you would like to discuss?
A: With the enhancement in technological innovation, compliant development and thresholds, the global high-end semi-trailer manufacturing system will be further shaped by automated and intelligent production techniques. In the future, the production of semi-trailers will be shifted to relying on modular design and automated equipment. The manufacturing specifications and process will be further improved, and plants will be shifted from traditional labour-intensive production to more automated production characterised by modular, standardised and environmental protection.
We believe that high-end manufacturing compliant plants will follow or meet the following features: high precision feeding and shaping devices; automated welding or robotic welding; electrophoresis with high automation, KTL or e-coating with low VOCs emission, and robot-controlled powder coating system; paced assembly line; and digitalised warehouses.
CIMC Vehicles will follow the growth trend of the future industry in its production and manufacturing. We have continuously deployed high-end manufacturing systems worldwide since 2014, and Light Tower plants are the results of CIMC Vehicles upgrading semi-trailer and specialty vehicle manufacturing plants to high-end manufacturing and automated and intelligent manufacturing. Closely following the overall objective and technical direction of ‘Industry 4.0’ and ‘Made in China 2025’, we have adopted modern design concepts and techniques, innovative technology and equipment, industrial Internet, digital information management system in an integrated manner.

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