Foton Invest In Domestic & Regional Strengths

Long-Term Strength
Commercial Vehicle Sales, CBUs

Chinese heavy truck manufacturer Foton Motor Co. has announced that it will invest US$300mn to build its first factory in Brazil. Production is expected to begin in 2013, and will reach annual output of 30,000 units by 2017. BMI has long maintained that vehicle production will develop in the country; indeed, we believe that Brazil will mature into a vehicle production hub for the Latin America region on the back of ongoing investments from international auto manufacturers. This latest investment is in line with this view.

Currently, we forecast 1.8% growth in 2012 in the commercial vehicle (CV) segment. As the graph shows, we forecast stronger growth over the medium term. We believe that Foton will seek to gain a share of this growing market, and also to export some of this output to elsewhere in the Latin American region. Indeed, a number of Chinese CV manufacturers have invested in Latin America to gain greater market access in the region ( see our online service, February 28, 'JAC's Regional Penetration To Be Hurt By Competition And Weak Demand'). We believe that these manufacturers are increasingly keen to expand their market penetration in this generally fast-growing region.

In September, Foton posted a drop of 14.7% in its business returns in H112 compared to the same period in 2011. The company reported total sales of 332,000 vehicles in H112 which represents a drop of 7.3% compared to the same period in 2011. Foton's income totalled US$4.15bn for the six months while its net profit reached US$289.21mn, which represents a hike of 159.9% compared to the same period in 2011. This substantial increase is attributed mainly to the manufacturer completing verification of its new assets.

This article is tagged to:
Sector: Autos
Geography: Brazil, Brazil, China, Brazil, Brazil

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