BAIC Group: Overseas Base Drives Econ­omy

Beijing (English) - - CONTENTS - Trans­lated by Huang Xing­pin, Pu Songlin, pol­ished by Mark Zuiderveld

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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