Shaanxi Automobile steering into Russian and Central Asian markets

Heavy trucks are being made in a plant of Shaanxi Automobile Holding Group, in Xi'an, Northwest China's Shaanxi province, August 18, 2006. [Photo/IC]

Vehicle manufacturer's expansion aims to meet growing demand and keep pace with European competitors, reports Zhong Nan in Xi'an

Shaanxi Automobile Holding Group, the largest truck manufacturer in northwestern China, plans to build more spare-parts warehouses, assembly lines and service centers in Russia and Central Asian countries in the next three years to keep pace with more established competitors in the region.

With medium-duty trucks assembled in Kazakhstan, lengthened-chassis delivered to Russia and heavy-duty trucks sold to Uzbekistan and Tajikistan, the Xi'an-based company is building a solid reputation for competitively priced and easily serviceable products, which include heavy military off-road vehicles, heavy and light trucks, large and medium-sized passenger cars, minivans, engines and spare parts.

Yuan Hongming, general manager of Shaanxi Automobile, said continued foreign and domestic investment in infrastructure, energy and trade development will be vital to supporting economic growth in Russia and Central Asia over the next decade.

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The Beijing-based China Chamber of International Commerce said that truck sales in Russia and Central Asia accounted for 17 percent of global sales in 2013, driven by an infrastructure boom and the surging consumer goods and logistics demand of more than 210 million people in these two markets, which offer rich opportunities for Chinese and foreign truck manufacturers.

Yuan said it was not easy to gain a foot-hold in these markets where logistical issues such as ensuring spare parts reached customers on time and the number of after-sales branches posed difficulties in the early days.

Eager to establish a reputable brand image in a new market, the company initially shipped spare parts by high-cost air cargo and invested heavily to establish regional service centers in major cities such as Nizhny Novgorod, Samara and Vladivostok in Russia and Almaty in Kazakhstan.

"Because these trading partners enjoy good relations with China, and local businesses and people trust Chinese partners, we face fewer trade barriers in these markets," Yuan said.

After exporting 6,416 trucks to the Russian and Central Asian markets in 2013, Shaanxi Automobile decided to build a large spare-parts warehouse and two logistics centers in Russia to enhance its after-sales ability. Construction is due to start in October.

The company is also planning to expand its capacity and number of employees at its assembly plant in Kazakhstan in the next three years to avoid having to pay duty up to 30 percent in the Commonwealth of Independent States free trade area.

Shaanxi Automobile and its 20 subsidiary companies produced 100,000 trucks for both domestic and global markets in 2013. Its overseas marketing network covers 60 countries, with 260 service branches and maintenance centers.

Wang Gang, deputy general manager of Shaanxi Heavy Duty Automobile Co, a unit of Shaanxi Automobile, said the main competitors in the Russian and Central Asian markets are European truck makers such as Sweden's Scania AB and Volvo Car Group, Germany's Mercedes-Benz and MAN AG of Germany.Many of these European trucks are secondhand and widely used as vehicles for construction work and logistics services.