[China Time] Dongfeng Motor Travels Long Road Over 40 years' Reform and Opening
Zhou Fang
/SOURCE : yicai
[China Time] Dongfeng Motor Travels Long Road Over 40 years' Reform and Opening

(Yicai Global) Dec. 5 -- Dongfeng Motor, one of China's big four auto groups, ranks 65th in the Fortune Global 500 list with current operating revenue of USD93 billion and claims the number two spot in the country's vehicle industry.

The growth and development of the Wuhan, Hubei province-based company have witnessed the remarkable progress of the Chinese vehicle industry over 40 years of reform and opening, growing into a sector with strong competence from a formerly merely large-scale one that had started from small beginnings. 

A China First

As the first auto factory designed and built independently by Chinese, Second Automotive Works, the predecessor of Dongfeng Motor located in Shiyan in south-central Hubei province, came into being in September 1969 with an annual capacity of 10,000 commercial vehicles by 1986. It changed its name to Dongfeng Motor in 1992. 

Demand for cars emerged in China after the mid-1980s, one of the first benefits reform and opening conferred. China could only make heavy-duty vehicles, and cars were essentially all imported at that time.

China listed the auto sector as a national pillar industry in 1986. Against the backdrop of the era, the best option was to directly introduce foreign advanced products and technologies into China, for which setting up joint ventures became the method of choice.

Dongfeng's first JV for finished units was Peugeot Citroen Automobile, which was established in 1992 with France's Citroen. The basic mode at that time was for the Chinese and foreign partners to set up a joint venture, with the Chinese side providing land, funds and labor, while the foreign party contributed blueprints, brands, capital, technical personnel and major imported components, with the JV firm assembling, producing and marketing the finished goods.

The introduction of the JV vehicle was decisive at the inception of the nation's auto industry, whose scale has burgeoned over the 20-plus years since the mid-1980s. Its production and proportion have also swollen year by year, with the share of car production overtaking that of heavy-duty vehicles in 2002 to become the largest group of vehicles. 

Seizing the opportunity of Japanese and South Korean car giants' incomplete penetration of the Chinese market, Dongfeng set up JVs with Korea's Kia Motor and Japan's Nissan Motor and Honda Motor successively from 2002 to 2003.
 

Dongfeng Nissan was the largest JV in the auto sector and even all of Chinese industry with registered capital of CNY16.3 billion (USD2.4 billion) at that time.

Dongfeng Nissan has developed soundly since its establishment, with sales volume rising rapidly to top 15 million units. Sales revenue has passed the CNY180 billion (USD26.2 billion) mark and its operating margins remain industry-leading.

The rich experience of Chinese-foreign cooperation has enabled Dongfeng to continuously introduce the advanced management modes and methods of foreign-funded enterprises into operations, which has been key to improving organizational structure and work efficiency and promoting technological advances.

The cooperation between Dongfeng and partners has upgraded to a new phase of joint development from the past mode of 'simply importing the model and producing locally,' with restrictions on share ratios of foreign carmakers in JVs lifted, which has allowed Dongfeng to develop new global product platforms, expand its overseas markets and innovate business models with foreign partners.

Self-Reliant Innovation

In addition to grabbing domestic share, Chinese self-owned auto brands represented by Dongfeng have also gradually staged forays abroad to capture foreign markets. The company's international business finished its market-oriented reform and became an independent legal entity in 2003, with exports rising year by year since then, and its autos available in more than 70 countries and regions. 

Chinese carmakers have realized that only independent innovation will build their future competence. Taking the lead, Dongfeng has sought no new passenger-car JVs since 2012 but has further widened and innovated its open cooperation model. 

On  the basis of internal and external technical cooperation and accumulation, Dongfeng has proposed to facilitate  research and development of unmanned driving technologies, bolster research into  leading technologies, quickly harvest the fruits of its independent innovation  and greatly enhance its core competitiveness per its five guiding principles of  being light, electrified, smart, connected to the internet and shareable  to lead development of China's auto industry in the new era and move toward becoming a first-class global enterprise.

Editor: Ben Armour

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Keywords: Dongfeng Motor