Joint venture project encounters Cummins Jedi fight back
Cummins, a global leader in engine manufacturing, has the potential to become China's top supplier of engines for heavy, medium, and light trucks. By localizing the production of these products, the company is positioning itself to dominate the Chinese truck market. Recently, Cummins, the U.S.-based engine giant, signed a feasibility study with Foton, China’s largest light truck manufacturer, to explore a joint venture for producing light-duty diesel engines.
The parties involved in the feasibility study include Beijing Foton Motor Co., Ltd., Beijing Foton Environmental Protection Co., Ltd., Cummins Inc., and Cummins (China) Investment Co., Ltd. Together, they plan to establish "Beijing Foton Cummins Engine Co., Ltd." This move reflects Cummins’ broader strategy to expand its presence in China and introduce advanced technologies tailored for the local market.
In 2005, the Chinese heavy truck market faced a sharp decline, and increased competition put pressure on Cummins’ existing joint ventures. To address this, the company began seeking new partners and restructuring its approach to maintain its dominance. The shift toward light truck engines was driven by two main factors: the shrinking heavy truck market and challenges within existing joint ventures.
For example, Volvo and China National Heavy Duty Truck, as well as Isuzu and Qingling Motors, established their own partnerships, while Cummins' collaboration with Shaanxi Auto and Weichai Power became complicated due to shifting control dynamics. These challenges pushed Cummins to rethink its strategy and focus more on the growing demand for light truck engines.
Since 1986, Cummins has been working with Dongfeng Motor through licensing agreements. In 1996, the two companies formed a 50-50 joint venture, Dongfeng Cummins Engine Co., Ltd. Over time, the partnership expanded its product range from 3.9-liter engines to include larger models like the 5.9-liter and 8.3-liter engines. However, when Dongfeng partnered with Renault, it introduced a competing engine, putting Cummins at a disadvantage.
This prompted Cummins to look for a new partner, leading to its collaboration with Foton. The feasibility study marks a crucial step in setting up a joint venture that will produce high-performance light-duty diesel engines for use in various vehicle types, including light trucks, pickups, SUVs, and MPVs. The engines—specifically the 2.8L and 3.8L inline four-cylinder direct-injection models—are brand new and have never been used anywhere else.
With this partnership, Cummins finally enters the Chinese light truck market, which had previously been a gap in its product lineup. Foton, as the largest domestic light truck producer, provides an ideal platform for Cummins to launch its 1.3L engine. The joint venture is expected to last 30 years, with a total investment of 1.946 billion yuan and a registered capital of 1.019 billion yuan.
Analysts believe this move is a strategic milestone for Cummins, marking its first global entry into the light commercial vehicle sector. It will enhance the company’s product diversity and strengthen its position in the Chinese market. Foton, in turn, benefits from meeting stricter emission standards and aligning with global product development goals.
Since the 1980s, Cummins has evolved from a traditional heavy-duty engine manufacturer into a multinational provider of full-range diesel engines. With its expanding production capacity and continued partnerships, the company aims to become the leading engine supplier across all truck categories in China.
By 2010, Cummins plans to increase production at Dongfeng Cummins to 200,000 units annually, with projected sales in China reaching $3 billion. In 2005, the company even held its Global Board of Directors in Beijing for the first time in 15 years, underscoring the growing importance of the Chinese market in its global strategy.
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