As the largest manufacturer of commercial vehicles in China, Foton Motors (600166) has recently taken a new step toward sprinting millions of automobile manufacturers. On March 10, Beijing Automobile Industry Holding Co., Ltd., the controlling shareholder of Foton Motors, signed the Letter of Intent for Cooperation with the People's Government of Deyang City, Sichuan Province, and plans to build a production company with an annual output of 100,000 light trucks (including engineering vehicles) in Sichuan.
Industry analysts believe that this move is one of the major measures for Foton to consolidate its position in the light truck field and seize the southwestern market, which will help further strengthen the brand influence and market share of Foton Motor. However, due to the low gross profit margin of Foton Motor's light trucks, the project's profit contribution to Foton Motor may be limited.
It is reported that 100,000 light trucks (including construction vehicles) are initially planned to produce production vehicles, era light trucks, and aoling light trucks. The specific business will be determined based on the local market capacity and construction conditions.
Cinda Securities analyst Xing Haizhi believes that due to the fact that the Foton's era light truck series belong to medium and low-end models, coupled with the low price positioning of its Foton autos and relatively high production costs, the profitability of Foton Motor’s project may not be strong. However, this project is in line with the overall development strategy of Foton Motor. According to reports, currently only Yunnan Hongta and Chongqing Lifan produce light trucks in the southwest region. Both the production scale and the market influence are currently unable to compare these two companies with Foton Motor.
Therefore, Foton Motor's production capacity in Sichuan will help improve its own production capacity in the country, while the other side will also seize the opportunity of the Southwest market.
According to public information, Foton Motor Light Truck currently has a production capacity of approximately 400,000 vehicles. Xing Haizhi estimates that by 2010, the young card industry will have a scale of about 1.9 million vehicles (including about 20% of exports), with an average annual growth rate of 20%. If Foton can maintain its existing advantages in the light truck industry, it will be able to maintain the current 30% or so. The market share, that is, the need for light trucks with a capacity of 570,000 units, therefore, Futian will need to add 170,000 new capacity.
According to him, at present, the demand for low-end light trucks in China mainly comes from the upgrading of agricultural vehicles in rural areas. At present, there are millions of low-end light trucks in China, and the upgrade base is large; the needs of mid- to high-end light trucks mainly come from the city's logistics and transportation industry. Therefore, as far as China's economic development is concerned, the entire industry will continue to grow in the next few years.
In terms of production capacity, Foton’s existing light truck capacity is mainly distributed in Zhucheng, Beijing, Changsha, and Nanhai, Guangdong. Among them, the current capacity of various light trucks in Zhucheng has reached 300,000 vehicles, mainly producing the time series and some Olympian series; Beijing has about 100,000 light trucks, but part of the production capacity may be transferred to the production of light passengers, MPVs, etc.; Changsha production capacity is about 5 Millions, but also production of engineering vehicles and other products; Guangdong Nanhai plant is not directly invested by Foton Motor, but it can be viewed as the production capacity of Foton Motor. After completion in 2010, there will be about 100,000 production capacity, including SUVs, pickups, etc. .
Therefore, Xing Haizhi believes that as a better choice for the Midwest market, Foton Motor’s construction of a light truck plant in Chengdu is clearly reasonable and predictable. Previously, Foton Motor has publicly stated that it will achieve an annual production and sales volume of 800,000 to 1 million vehicles in the “Eleventh Five-Year Plan†period.
However, industry analysts believe that the biggest aspect of Foton Motor is not the expansion of light truck capacity, but the improvement of profitability. According to the annual report, in 2007, Foton Motors sold more than 400,000 commercial vehicles, realized main business income of 27.865 billion yuan, an increase of 40.53%, and achieved a net profit of 388 million yuan, an increase of 642.88%; net asset yield reached 20.28%.
In addition, analysts also believe that on March 12th, Foton Motor’s Private Placement Program was approved by the China Securities Regulatory Commission’s Issuance Committee, which indicates that Futian’s development strategy of increasing product innovation and improving product technology and quality has financial guarantees. It is beneficial to the further improvement of its profitability.
View related topics: Beiqi Futian, Futian Automobile brand value of 22.157 billion yuan
Bangnuo Machinery Co., Ltd. , http://www.jsrollformingmachine.com