Why Are Foreign Trucks Being Localized? Two Key Reasons!

Let me ask everyone a question: Has anyone driven a Hua Wo truck? I believe at least 50% of friends have never heard of this brand. Recently, with one wave after another of news about Scania's localization in China, Volvo has also been rumored to restart its localization efforts. You must be wondering why these foreign brands are now rushing to enter the market, while overseas media only focus on talking about cars? There are two key reasons. First, China's logistics is undergoing an upgrade towards digitalization and standardization, which means contract-based logistics-note that the share of contract-based logistics will grow increasingly larger. In other words, the volume of fixed contracts like bulk cargo and logistics company fleets will increase. This will inevitably lead to vehicle replacement, but what kind of vehicle? Those who have worked in cross-border transportation of cold chain containers for courier companies will surely know what brand vehicles company owners prioritize when they have extra money to stabilize rentals. Second, the foreign ownership limit on commercial vehicles in China has been lifted, allowing full foreign ownership. Volvo was not without localization experience; on the contrary, it was the first in China. As early as over twenty years ago, in 2003, during the era when domestic companies traded market access for technology, Volvo Trucks and Sinotruk jointly established Jinan Hua Wo Truck Co., Ltd. Both parties invested 50% each, with a joint venture term of 30 years. After the joint venture was established, it produced Volvo's then-new flagship models such as the FFM, but Volvo Trucks soon fell into trouble, with annual sales dropping to just 200 units by 2005. The two parties ended their cooperation prematurely, and later, Mercedes-Benz followed Volvo's old path. With these lessons in mind, Scania proved very smart. Here's a clarification: joint ventures are not the poison; the separation of decision-making power and the incompatibility of local conditions are the real poison. Volvo didn't just make this one attempt at localization. In 2021, it planned to acquire the original production base of Jiangling Heavy Duty Truck, but in May 2023, it announced the termination of the deal, leaving the project stranded. Now that the equity ratio restrictions have been relaxed, factories should be built where they should be, and vehicles should be produced where they should be. The most critical issue is how foreign truck brands can compete with domestic flagship models in terms of cost-effectiveness in the China market. Scania's solution is to move China manufacturing globally. To put it bluntly, building factories in China leverages China's industrial capabilities and labor cost advantages, saving on public funds, spare parts fees, and import taxes. The same model sold domestically for tens of thousands less than its foreign counterpart, while maintaining the same price abroad. This way, the brand maintains its image, and the financial statements remain solid. Domestically, if sales are sluggish, they can then export to foreign markets. The initial CKD model involved importing parts for domestic assembly, gradually dismantling China's supply chain and replacing imported components. Start with terminal models, avoiding the flagship brands like V8. Whether this strategy will work remains to be seen. Over the past two years, electric heavy trucks have dominated contract logistics, particularly in bulk transportation, driven by multiple factors. Whether Volvo or Steyr Mercedes-Benz can keep pace, whether new energy solutions can overcome cultural adaptation challenges, and whether domestic logistics providers will recognize the full lifecycle value they promote-all remain uncertain. Having said so much, let me advertise myself: Are 4m,26m,8m,9m, and 6m semi-trailers profitable? For information on fuel-powered vehicles, ride-hailing services, and hybrid/electric vehicles, visit my homepage. Follow me to explore people, vehicles, and the industry.