12.07.2012

Hiab JV for China

Cargotec, owner of Hiab, has agreed a joint venture with China National Heavy Duty Truck Group (CNHTC), China's third largest manufacturer of heavy duty trucks and the parent company of Hong Kong-based Sinotruk to sell and support Hiab products and build improved CNHTC loader cranes for the Chinese market.

The two partners will each hold a 50 percent stake in the joint venture, with a combined investment expected to be in the region of €100 million. Cargotec estimates that its equity investment during the first year will be approximately €10 million. The transaction is subject to the relevant regulatory approvals, which are expected to take six to nine months.

CNHTC's national dealer and service station networks will be used by the joint venture for the distribution, sale and service of Hiab cranes and hooklifts.

The joint venture will also develop CNHTC's existing loader crane range and production base for the Chinese market. Cargotec said that the combination of both companies' technical know-how within the joint venture should make it a significant player in the loader crane business, particularly in China.
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A Chinese built loader crane

Forecasters are anticipating double-digit growth in the Chinese load handling equipment market over the next few years, driven by demand for new equipment and replacements and for greater efficiency in the infrastructure, industrial and property sectors, as well as by urbanisation.

The existing market for loader cranes in China is estimated at between 7,500 and 10,000 units, currently dominated by local manufacturers. This is expected to grow to around 30,000 over the next five years.

Cargotec chief executive Mikael Mäkinen said: "This joint venture represents an important strategic step for Cargotec, demonstrating our commitment to growing our offering and presence in China. Cargotec's strong existing range of load handling equipment, combined with CNHTC's leading position in the Chinese heavy truck market, will secure a fast and cost-effective channel for placing Hiab equipment in the hands of customers all over China."

Wei Zhihai vice president of CNHTC added: "Cargotec's long experience of technical innovations makes it the perfect partner for the joint development of a new truck crane range tailored to the needs of Chinese customers. Together, we expect to build world-class expertise with the purpose of securing a strong market position for truck cranes."

Vertikal Comment

This move follows Palfinger’s announcement of its joint venture with Sany at the end of February. The Cargotec/Hiab joint venture has the advantage of being with a major, well-established player in the truck market with its extensive market coverage already in place. However Palfinger has the benefit of a much more aggressive free market partner in Sany and possibly more importantly, a like-minded business partner, which when it comes down to it is the most important factor of all.

CNHTC has experience of joint ventures, having worked with Volvo Truck and Steyr, but the large national companies in China typically struggle to adapt to the market anywhere near as well as the newer entrepreneurial led companies like Sany.

It will be very interesting to look back in five years and see which played solution worked out the best – the experienced truck company or the thrusting privately held partner? I know which one my money would be on – but it could go either way.

A deal like this was essential to keep the Hiab brand up with that of Palfinger on the global stage and this is as good a move on Cargotec’s part as any.