BAIC Group: Overseas Base Drives Economy
BAIC Group has followed the Belt and Road’s mission by expanding its business to other countries. BAIC Ruili in Yunnan is one case in point, which has opened doors to employment opportunities with its neighbouring country of Myanmar.
BAIC Motor Corporation Limited (BAIC Group), founded in 1958, has grown into a large state- owned auto company, covering a wide range of business such as auto research and development, and manufacturing, auto components manufacturing, auto service trade, and investment and financing. In recent years, BAIC Group has advanced the Belt and Road's mission and expanded business to countries along its route. By providing auto products and services to meet different demands, BAIC Group helps the local auto industry raise its manufacturing and promotes regional economic development.
From BAIC Ruili to Southeast Asia
As one of the main car companies in China, BAIC Group not only boasts proprietary brands such as Beijing Auto, Senova, Changhe and Foton, but has introduced international brands like Hyundai, Mercedes-benz and Suzuki. It produces sedans, off-road vehicles, commercial vehicles and new energy vehicles. Based in Beijing, BAIC Group has established eight passenger vehicles and nine commercial vehicle manufacturing bases in over ten provinces and cities across the country.
While maintaining a leading position in the domestic auto industry, BAIC Group founded BAIC International Development Corporation Limited in June 2013 to integrate internal resources and build a new strategic platform for overseas business. The company
specialises in operating overseas industrial manufacturing bases, exporting vehicles and auto parts, financing, improving product adaptability and support for production technology. It has become a key platform in BAIC Group's global industry layout and for creating Belt-and-Road-based projects.
On December 20, 2013, BAIC Yunnan Ruili Automotive Corporation Limited was jointly founded by BAIC Group and Yunnan Jingcheng Group. The joint venture was to build a vehicle manufacturing base in Ruili, which according to BAIC will reach an annual output of 150,000 vehicles. With a total investment plan of 3.6 billion yuan, BAIC Ruili plans to implement projects for vehicle and auto parts manufacturing, warehouse logistics and comprehensive supporting facilities. The projects will be undertaken in two phases, with each phase taking up 134 hectares of land.
The base is located by the side of Mangman Passageway, beside Ruili Wanding Economic Development Zone, a first-class national port. By virtue of Ruili's advantageous location at the intersection of the greater China economic circle, South Asia economic circle and ASEAN economic circle and in a key pilot zone for development and opening-up, BAIC Group chose to set up factories in this small yet vibrant border city. This not only proves cooperation between the capital and border area, but also BAIC'S response to China's Belt and Road Initiative.
According to planning, the base will focus on vehicle manufacturing and specialise in marketing, tuning cars, new clean energy, and commerce and trade. Auto products to be manufactured mainly comprise commercial vehicles and passenger vehicles that cater to demands of Southwest China and Southeast Asian countries, such as M-MPV, medium and large MPV, pick-up trucks, and BJ40/BJ40L SUVS. According to Phase I, the base's annual output will reach 50,000 vehicles in 2017. Phase II sets out that the annual output will increase by 100,000 vehicles as of 2020. A product display area for international business is in the process of being developed. On July 26, 2015, BAIC Yunnan Ruili launched its first group of products, including the BJ40 and V2, BAIC'S two representative types of vehicles, which adapt to the terrain and road conditions in Southeast Asia.
After completion and being put into production, BAIC Yunnan Ruili had its first customer, a company from Myanmar, Ruili's bordering country. In March 2017, Yunnan BAIC Special Vehicle Company, a subsidiary of BAIC Yunnan Ruili, signed a strategic partnership agreement with an affiliated company of Myanmar Thitsar Mandalar for long-term strategic cooperation in Myanmar's commercial vehicle marketing and service. In addition, Thitsar Mandalar purchased 1,000 semitrailers from BAIC Ruili.
Advancing Myanmar’s Auto Manufacturing Industry
The order from Myanmar initiated BAIC Yunnan Ruili's business and service in Southeast Asian countries. Since then, BAIC Yunnan Ruili has taken the lead in guiding Myanmar's auto manufacturing industry.
Presently, most vehicles driven in Myanmar are imported second-hand vehicles that have been used for many years. In recent years, the local government has tightened control and regulations over such vehicles and began to encourage developing Myanmar's auto manufacturing industry. With an abundance of agriculture, Myanmar has superior natural conditions and resources, but has always been weak in the industry. Without a complete set of industrial policies and being short of workers and management personnel, sustaining its auto industry is a hard goal to maintain.
As the people of Ruili and Myanmar living near the border enjoy special policies for exchange and employment, it is common to see Myanmar's migrant workers in Ruili. Over half the employees of BAIC Yunnan Ruili's manufacturing base are people from Myanmar. Through prejob training and routine work, employees from Myanmar managed to grasp advanced vehicle manufacturing and will become a backbone support for Myanmar's future auto industry.
To meet demands for cars in Southeast Asia, especially Myanmar, BAIC Yunnan Ruili has established product research and development to produce auto products that cater to different countries' demands in terms of function and price. According to Li Xingxing, executive vice-president
of BAIC International Development Corporation Limited, in accordance with market demands, BAIC Yunnan Ruili mainly produces commercial vehicles, MPVS and passenger vehicles. However, as policies for the auto industry vary from country to country, in addition to compliance with local laws and regulations, the vehicle configuration should obtain local vehicle/ component approval, and the vehicle should be equipped with functions that adapt to the habits of users.
Take Myanmar for example. With its geographic location, Myanmar is hot and humid year-round and has high demands for air conditioners. Therefore, the vehicle's ability to withstand high temperature should be enhanced through product development and special manufacturing techniques. With a rugged terrain and lots of mountainous areas, Myanmar really needs vehicles with decent ground clearance and strong power. “Vehicles with 1.6-litre displacement would be enough for us in China, but Myanmar might require a 2.0-litre,” said Li. Though the appearance of such vehicles might have no difference from 1.6-litre ones, their internal structure will be alternated according to specific needs.
In addition to environmental features, BAIC Yunnan Ruili goes deep into local areas to learn about local people and actual needs of enterprises. In terms of civil use, like most Southeast Asian countries, each household in Myanmar has many family members. Whenever a family travels with all their belongings, a vehicle needs to be big enough to accommodate them. This problem can't be solved by simply adding seats, but adjusting the length, width and internal structure of the vehicle.
As for commercial use, Myanmar is in the initial stage of developing its industrial manufacturing industry, while demand for commercial vehicles in fields like infrastructure and logistics is constantly increasing. BAIC Yunnan Ruili produces components of large commercial vehicles in its manufacturing base and then assembles these components into modules. Afterwards, the modules will be transferred to the manufacturing sub- centre and assembled to finished vehicles to then be sold. In this way, logistics expenses are lowered and cost optimisation is achieved. This also greatly helps Myanmar staff gain employment.
According to Li, 2017 is a critical year for the manufacturing base to be put into production and reach target outputs.
Meanwhile, Myanmar's manufacturing sub-centre and market centre will also be put into operation this year. By constantly acquiring in-depth understanding of needs of customers such as local consumers, enterprises and government, BAIC Yunnan Ruili will gradually expand its business to other Southeast Asian countries like Laos and Vietnam. Vehicles with a steering wheel on the right/left hand side will be produced in accordance with left-/right-hand traffic in the country.
Build an Automobile Industry of the Whole Value Chain
Apart from the Yunnan Automobile Industrial Base, which is oriented to Southeast Asian countries, BAIC Group is also preparing to build industrial bases in South Africa, Mexico and
Iran. With four bases as the core of an overseas development model, BAIC Group has realised localisation of production and operation which will help improve research and development, manufacturing and quality management of local automobile industries.
On December 2, 2015, with the heads of the two countries present at the site, BAIC Group and the Industrial Development Corporation of South Africa co-signed a 5 billion yuan memorandum of understanding about the joint venture and cooperation project of an industrial base. The base is set to produce passenger vehicles, off-road vehicles, light carrying vehicles and other vehicles suitable for the market. The base factory will include three major processes, namely welding, coating and assembly.
Its phase I project is to achieve an annual productivity of 40,000–50,000 sets while that of phase II is 80,000–100,000 sets. At the end of August 2016, a foundation laying ceremony was held.
As a typical Sino-south Africa cooperation project funded by two large state-owned enterprises, the base not only marks the first time for a Chinese automobile company to operate a modern
manufacturing plant covering four major processes in South Africa, but will also bring the country economic and employment benefits. Once put into operation, the project will employ about 13,000 people. If design capacity is reached, it will add about 6.2 billion yuan to South Africa's export trade.
According to plans, the South African base will produce both left and right-hand drive vehicles which are tailored to South Africa and other major African countries. Also, by utilising South Africa's bilateral and multilateral agreements on international trade it will expand the base's influence to other markets in Europe and the Pacific, and turn itself into a regional operation and management centre of products, technology, talents and finance.
“The main reasons why we localise our overseas industrial bases in South Africa, Mexico and Iran are that these countries have a good basis in the automobile industry and their influence reaches neighbouring countries and they strongly support construction projects of the Belt and Road Initiative.” With South Africa, Li mentioned that although the country has no local automobile brands, big international automaker brands have already settled down there with an influence spreading to neighbouring countries. Since the commencement of the construction work of the base, local ministerial officials have visited and invited representatives of BAIC Group to visit related local government departments. Currently, the plant's construction is synchronised with market development, so the first batch of products is set to be completed by the end of this year, while industrial bases in Mexico and Iran are also undergoing preparations.
By the end of December 2016, BAIC International Development Corporation Limited, with 154 marketing sites, seven overseas companies and several overseas industrial bases, had exported 57,000 vehicles to 47 countries and regions around the world. According to Li, in recent years the Belt and Road Initiative has caused the company to change its practices in its strategy of going global. In the past 20 years, BAIC'S international businesses were dominated by exporting its self-owned brands like Foton and Changhe and dependent on overseas selling agents. In the situation of a strategic transition from pure manufacturing to manufacturing services and innovation, BAIC Group has made active progress in construction projects related to the Belt and Road Initiative with BAIC International Development Corporation Limited as an overseas development platform. As mature collaborative models have been established, the Group cooperates with overseas partners in establishing management mechanisms, orienting business development, and developing markets. So far, BAIC Group has received praise from local governments and partners for its local industrialisation and cultivating talents.
On April 17, 2015, the BAIC Strategic Advisory Commission was established to regularly collect opinions and suggestions of its global partners and adapt product production and services to the needs of local markets. To achieve the shared goals of local services and mutual benefit, BAIC Group and its overseas partners have changed their priorities of discussion. Selling is no longer the focus, and they give priority to manufacturing, research and development of automobiles, after-sales services and automobile financial services. In the future, BAIC Group will further adhere to its overseas development. To be specific, it will sell major products in countries and markets while guaranteeing quality services. In this way it will achieve the whole value chain operation and play a role in improving automobile manufacturing and driving local economic growth as well as developing micro-, smalland midsized enterprises.
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