Not competing on price

China is now a crucial market for international carmakers. Senior executives wait anxiously each month for sales data, while their designers work on new models with the Chinese in mind. Foreign brands are popular too, with roughly a 70% share of domestic sales.

By comparison, foreign truck manufacturers like Volvo and Daimler have made much less headway. The main challenge is pricing, with domestic trucks so much cheaper than their international counterparts. For example, the popular Dongfeng Liuzhou Chenlong sells for around Rmb200,000 ($30,889). Sinotruk told WiC that its heavy-duty vehicles are priced between Rmb200,000 and Rmb360,000.

The cost to buy comparable foreign trucks is estimated to be at least double that of domestically made vehicles, reckons CBN Weekly.

Local brands from Dongfeng, FAW and Shaanxi Auto also have a reputation as more adapted for some of the more poorly built roads in inland provinces. Hence foreign truckmakers have only an estimated 2% share of the commercial vehicle market, excluding light commercial vehicles, which are viewed as passenger cars in China, says the Financial Times.

“Western commercial vehicle makers have suddenly woken up to the fact that this market is very important and have started partnering up with Chinese producers,” Ivo Naumann, head of Alix Partner’s Shanghai office, told the newspaper late last year.

Volvo – which, unlike the car brand, is not owned by China’s Geely – is one of the world’s leading truck manufacturers. It is now trying a different tactic to sell vehicles in China.

CBN Weekly reports that it has been sending people like Zang Jun on missions around the country to train new drivers in how best to operate Volvo’s heavy-duty vehicles.

For example, Zang tells CBN Weekly that few customers know that using the throttle to control speed instead of relying solely on the brake helps to get better mileage. He also covers areas like driving etiquette and vehicle care. For drivers who are too lazy to read the operating manual (that would be all of us) Zang also offers crash courses on the different functions of the complicated dashboard.

And customers seem to appreciate Volvo’s efforts. A coal transportation company in Hebei province’s Tangshan, was able to cut fuel costs by a Rmb100,000 a year after Zang showed its drivers more efficient ways to handle their vehicles. The company later purchased 20 more Volvo heavy-duty trucks.

Volvo now hopes that offering similar after-sales assistance and training will help boost sales in the Chinese market.

Truck output is expected to exceed a million units this year, accounting for an incredible half of the world’s total. With ongoing investment in the logistics sector, analysts say annual sales could reach 1.5 million units by the end of the decade.

“China is quite different from what it was years ago as its national wealth grows. Demand for better, safer and less polluting vehicles are picking up gradually as trucking service operators retire their outdated fleets,” Chen Liang, an analyst with Huatai Securities, told Reuters.

Competition is also likely to stiffen. Last year Daimler signed a joint venture with Beiqi Foton, a major Chinese truck assembler. Similarly, MAN, the fourth-largest manufacturer globally, spent $787 million to acquire 25% of Sinotruk, China’s largest heavy-duty truck firm. Toyota has also been making noises about entering the market.

In the meantime, Volvo will continue to send people like Zang to meet its newest customers, and through helping them save fuel, hopefully sell more trucks.

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