It may be a fertile market, but Caterpillar and Navistar are hardly breaking new ground with plans to set up a joint venture in the People's Republic. A source tells us the two U.S. machine makers are teaming up with China's Jianghuai Automobile to set up a truck venture, a source said, hoping to gain a foothold in China's 150 billion yuan ($22 billion) heavy truck market. But while the market may be fertile, it is a crowded space for foreign firms, with Daimler, MAN and others already tied-up with local partners.
Heavy truck sales in China rose 11.75 percent to 541,256 units in 2008, more than double the level in 2003, according to Nomura Securities, and are set to rise in the coming years on state pump-priming and infrastructure development.
While the money might be there, demand might not be for bourgeois trucks. "Foreign truck makers face a much bigger challenge in China comparatively because an Audi is a status symbol, while a Volvo truck can only push up trucking firms operating cost," said Chen Qiaoning, an industry analyst with ABN AMRO TEDA Fund Management.