After 33 years in China, Cummins found itself once again as an outsider. After a period of reflection, the company decided to reevaluate its approach and launched a strategic counterattack. Could its bold bet on light-duty diesel engines help ease its sense of loss in the heavy truck segment and restore its position as a market leader?
Driven by global trends toward passenger car dieselization, Cummins—historically a major player in medium- and heavy-duty diesel engines—initiated two key projects in the light diesel engine space at the turn of the century. One was a collaboration with Chrysler on a 4.2L and 5.6L diesel engine project, while the other involved Foton to produce 2.8L and 3.8L engines with an annual capacity of 400,000 units. The Chrysler project was set to launch in Indiana, USA, before 2010, and the Foton venture was scheduled to begin production in Beijing in 2009. But was this all about just entering the light diesel market?
In 2006, Wang Hongjie, Vice Chairman of Cummins (China) Investment Co., Ltd., led the fifth negotiation session with Beiqi Futian to establish a joint venture, Beijing Foton Cummins. This was the fourth large-scale engine-related joint venture Cummins had pursued in China, and the talks were progressing smoothly. However, Wang was more focused on accelerating the process rather than getting bogged down in details.
With over 20 years of experience in state-owned enterprises and 14 years at Cummins, Wang was well-versed in such negotiations. He wasn’t worried about the outcome but was keenly aware of the urgency. Just before leaving the office, he reviewed Weichai’s sales data, noting the rapid rise of this local competitor. He believed that by leveraging Cummins’ extensive product portfolio and global expertise, the company could find new opportunities outside of the heavy truck segment.
To speed up negotiations and show respect for Beiqi Futian, a rising force in China’s commercial vehicle sector, Wang led multiple meetings and even shared a drink with Futian’s top executives, who were “slightly intoxicated.†A special plane from the U.S. headquarters was also on standby to accommodate any visits from Futian’s leadership. “The combination of both parties is natural,†Wang explained. “Cummins needs to partner with China’s leading light commercial vehicle manufacturer to enter the booming light diesel market. Both sides have strong alignment in their goals.â€
Indeed, the formation of Beijing Foton Cummins was a win-win for both companies. For Futian, it provided access to Cummins’ advanced technology, helping it solidify its position as the “King of Light Commercial Vehicles.†For Cummins, it secured a first-mover advantage in the light diesel engine market and marked a significant step in its global transformation.
However, could this be the turning point for Cummins to regain its footing in China? While the joint venture was still in the preparation phase, Cummins faced fierce competition. Local rivals like Weichai and Yuchai were growing rapidly, posing a serious threat.
Wang described the Chinese diesel engine market as highly competitive, comparing Cummins to a “carp†that had energized the market, prompting local competitors—“native fishâ€â€”to grow quickly. Although Cummins had been present in China for decades, it now faced challenges from domestic giants that were developing faster and more aggressively.
Weichai and Yuchai, once small players, had become formidable opponents. Weichai, which had nearly gone bankrupt in 1999, was now a major player, while Yuchai had made significant strides in product development. Wang admitted that these companies were now subjects of respect and study for Cummins.
“Weichai and Yuchai’s total sales in 2007 reached 58 billion yuan, while Cummins China’s business volume was only 21% of that,†Wang said. “We must not underestimate them. Their growth is like a gun pointed at us.â€
Despite this, Cummins’ strategy in China was progressing steadily. In 2007, the company achieved over 40% growth, making China its fastest-growing overseas market. However, the pace of Weichai and Yuchai was even more impressive.
Looking ahead, Cummins aimed to maintain its position through continued innovation, localization, and partnerships. It was clear that the Chinese market was evolving rapidly, and the competition would only intensify. As Cummins sought to adapt, one thing was certain: the battle for dominance in China’s diesel engine market was far from over.
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