Why Cummins is bringing next-gen engine, truck technology to China before the U.S.
| April 18, 2014 |
I hate math. And math hates me. But I’m going to put aside my loathing of this particular discipline for a moment to illustrate why it seems like every company on the planet today is obsessed with China.
Cummins Engine has been a national player in China since the late 1970s and reaffirmed its commitment to that market last week during a press conference in Columbus, Indiana. The event, which I reported on here, was significant in that it was jointly held with Chinese truck manufacturer, Foton. It was clear from the event that Cummins has forged significant partnerships with key strategic players in the Chinese market with an eye toward dramatically increasing its on-highway marketshare there.
For fun, let’s say you own a business that manufactures valve stem caps. And your valve stem cap features a universal design (not a stretch, I know): You can use them on bicycle tires, automobile tires, truck tires – anything with a tire. And let’s say you make a 10-cent profit on every valve stem cap you sell. And you just sold one valve stem cap to 10 percent of the Chinese population. How much money do you have?
Well, according to Google this morning, there are currently 1.35 billion Chinese on the planet; 10 percent of that figure works out to 130,000,000 people. And if you can get each of those people to give you a mere dime, you’ll have $13 million in your pocket.
And there you have it. The reality of China is that the numbers involved are so astronomically huge, that if you have a viable product for that market, the potential rewards are stupendous.
That’s assuming, of course, that the Chinese actually pull off this on-going economic miracle, the whole thing doesn’t collapse in political chaos or the Chinese decide they don’t want to play by Western rules of business, after all.
I’ve been to China twice—both times during my tenure with Equipment World. And I’ve always remembered what one American executive working in Shanghai told me one night after a few drinks. The danger, he said, with investing in and trying to sell in China was pretty a fundamental one. “They want our money,” he said. “They want our knowledge. They want our technology. And they want us to leave.”
That was back in the 1990s. So it’s reasonable to assume that stance has moderated somewhat. Because the Chinese economic powerhouse—and Western investment in it—is obviously still going strong today.
But what is unusual about this approach is that Cummins is not content to merely pawn off older, technologically-obsolete engines and technology to the Chinese market. Instead, the company considers China a rapidly-emerging market worthy of its own diesel engine platforms. And moreover, these Chinese engine platforms will provide the basic building blocks for the next-generation of global diesels from Cummins – including engines we’ll be running here in North America.
According to numbers Cummins shared this week, the current size of the Chinese heavy-duty truck market is about 350,000 units. That’s comparable in size with the North American market today. But, China is still developing. Bringing the country into the Modern Age – and then providing the food, products and resources a billion-plus people will need to maintain that new standard of living will, by any reasonable estimate, eventually create an annual demand for modern, clean, reliable trucks and engines that is staggering to contemplate.
Which is why we may all see a great deal of our next-generation engines and trucking technologies originate in China.