Weichai Power has spent $922m on a 25% stake in Kion, as Western brands vie for the Chinese truck market.
A Kion production line in China Image: Kion Group |
Weichai Power, under the supervision of parent Shandong Heavy Industry Group, has signed a €738 million ($922 million) deal for a one quarter stake in German forklift truck maker Kion Group. The deal, signed in China's eastern Shandong province, marks the largest direct investment in a German firm made by a Chinese company to date and will offer Kion debt-financing relief.
As Chinese company's seek out investment opportunities overseas, Western truck marques are looking for ways to penetrate the lucrative Chinese market. While foreign brands enjoy a 70% market share for passenger cars, they occupy less than three percent of the total truck market. In 2010, foreign brands sold just 10,000 trucks in China, compared to the 990,000 units sold by their domestic rivals.
Volvo, Man and Mercedes are all looking for ways to increase sales in the growing marketplace, but are often priced out by the competition. Heavy duty trucks from one of the nation's major companies – FAW, Dongfeng or Foton – start at around 200,000 yuan ($31,920 whereas a Volvo truck might set you back as much as 900,000 yuan ($143,950). China is the only global truck market in which Volvo does not occupy at least a 10% share.
Nonetheless, Volvo's recent partnership with Dongfeng Motor Corp may provide new opportunities for the Swedish truckmaker, which plans to build vehicles more suited to the Chinese market. German rival MAN is also involved in several partnerships as it continues to increase its reach across China. Mercedes-Benz is also considering supplying Chinese companies with engines as upgrades on existing domestically-produced models.