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 loss risk Fukuda senior executives will go to the headquarters of Cummins in the United States in April to sign an agreement that authorizes the joint venture engine company Foton Cummins to produce high-power engines. The business scope of Foton Cummins was primarily to provide light-duty engines for Foton light trucks. 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. Auman GTL uses Cummins Engine 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 China National Heavy Duty Truck in 2005, its major customers in the heavy-duty truck industry became Futian, Shaanxi Heavy Duty Truck and FAW, and the rest were small and medium-sized heavy truck companies such as Jianghuai 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.†In Li Ziliang's view, a new generation of heavy truck products and technology upgrades will bring severe challenges to Weichai's heavy truck engine business. “Weichai’s dominant position in the field of heavy-duty truck engines did not depend on technology leadership. It was mainly due to the market environment. In the past ten years of rapid development of the heavy-duty truck industry, heavy-duty truck companies focused their efforts on quickly seizing the market, leaving no time for the engine. Other key components, but as the heavy-duty truck industry enters a stable development period, industry competition intensifies, and product technology upgrades, heavy-duty truck companies have begun to deploy engine manufacturing in recent years.FAW has already developed a new generation of high-power engines with AVL and its engine companies. China National Heavy Duty Truck and Mann have also finalized the introduction of Mann's new-generation engine technology. Dongfeng, Futian and JAC have finalized joint venture partners. Cummins and other foreign companies have strong technical strength. The introduction of new engine technology will be able to be introduced as soon as conditions for negotiation are met." Although the powerful financial resources are engaged in technological research and development, many technological turtles are recruited to tackle more advanced engine technologies such as the State and China. However, in Li Ziliang's view, the situation is not optimistic. "Weichai's engine technology foundation is still Steyr's technology. It is over 30 years old technology, and there is still limited space for improvement. And compared to Cummins and other international giants, there is a huge gap in the long-term technical gap between domestic engine companies. Catch up too much." According to Li Ziliang's analysis, Weichai’s “old family†China National Heavy Duty Truck has begun to introduce Mann’s new generation of engine technology. Once new products can become the main contribution of the major profits, Sinotruk will be able to make room for the lowering price of its engine. Grab the market, which will bring a major blow to Weichai, because the two technologies are of the same origin and are all Steyr technologies introduced under the leadership of the government in the early 1980s. The Pros and Cons of Tan Xuguang's Curse There are also some analysts and institutions that are more optimistic. CICC released a report at the beginning of this year that the entry threshold for heavy truck engines is relatively high, and that the success of self-built engines for heavy truck companies is still uncertain. The scale and customer advantage of Weichai in the heavy-duty engine development over the past ten years have made its current leading position in heavy-duty truck engines not easily shaken. However, Xia Shu, a senior industry analyst with long-term attention to Weichai, believes that even if Wei Chai’s heavy-duty truck business is temporarily flawless, the company’s strategic blind optimism in recent years will also make the company’s future development face high risks. “Weichai has too underestimated the risk of heavy-duty truck companies building their own engines. Foreign engines and commercial vehicles are thinking of ways to enter China’s gold rush quickly. They are in sync with domestic heavy-duty truck companies that are eager to build their own engines. Domestic engine companies do not have an advantage in technology. In this case, whether it is the previous market advantage or the long-term strategic cooperation with heavy truck companies, it is very fragile." Xia Shu believes. Xia Shu believes that underestimating the company's future risk stems from the fact that Weichai has been immersed in existing achievements during these years. After Weichai broke away from China National Heavy Duty Truck, a major customer at the time, in 2005, it lost at least 40,000 units per year. At that time, the situation of Weichai was generally considered to be worrying. However, Weichai has successfully consolidated its position in the heavy truck engine market with the rapid development of the heavy-duty truck market. The blind optimism in corporate strategy is closely related to Tan Xuguang, the founder of Weichai Empire. The person-in-charge of the above-mentioned heavy truck companies and many people in the industry who know Weichai revealed to the newspaper that Weichai’s internal personal worship is very serious and it only provides good news. “A meeting is to overcome external difficulties, a bright development of the enterprise, such as Tan Zongying Ming.†An industry insider who participated in the Weichai 100 billion annual celebration meeting told reporters at the beginning of the year, “Tan himself has a very strong management style. There are not many people in Weichai. Dare to speak in front of him." The success of Weichai today cannot be separated from Tan Xuguang’s entrepreneurial talent and strong management style. He likes to listen to the matador dance, is full of unyielding spirit, and dares to venture in the business. Tan Xuguang, who led Weichai from an endangered small enterprise with only a few hundred people at the beginning, has developed into a business with over 100 billion in revenue, over 50,000 employees, and business. An enterprise group that spans heavy trucks, engines, construction machinery, and luxury yachts. However, surging under the prestige, Xia Shu believes: “If Cheng Xiaoxiao loses his way, Chinese entrepreneurs often have no problem in leading the company from small to big, but from large to strong, many are stuck or even fall. The reason is that Chinese entrepreneurs usually do not pay attention to the cultivation and construction of management teams and scientific management systems in the process of leading a company's growth, and even individualism expands to the same extent, leading to a variety of problems for the company.The future prospects of Weichai depends on Tan Xuguang himself. Whether or not they can overcome self-restraint and constraints, overcome the common problems of domestic entrepreneurs, and advance corporate management in a better direction, Xia Shu said. Even if Weichai's self-adjustment is in place and there are no mistakes in the strategic decision-making, it seems to some industry professionals that independent engine companies have limited room for future development. "In addition to Cummins International, there is hardly a second successful independent commercial vehicle engine company. One is different from the large-scale passenger vehicles that can support the division of labor. The small-scale heavy truck companies are strategically unwilling to be controlled in the heart; In addition, from the point of view of profit, heavy truck engine profits as high as 20% -30%, much higher than the vehicle, heavy truck companies also have a strong interest in driving the engine, "said National Securities Auto Industry analyst Cao He said. Despite the continuous questioning of the outside world, Weichai is still singing and dancing. Weichai, which had just held a celebration of over 100 billion yuan in revenue at the beginning of the year, has set a grand goal of exceeding 200 billion yuan in income. The reporter contacted Weichai executives and asked questions from the outside world about the development prospects, but no response was received.
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