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Vehicle manufacturers take the fast track to success in Southeast Asian nations, reports Wang Chao.

Sluggish is not a new word to describe the Chinese truck industry, as the sector has been suffering consecutive drops in the past few years, both in the domestic and overseas markets. But amid the global gloom, Southeast Asia is becoming a silver lining.

Figures from the China Association of Automobile Manufacturers show that during the first three months of the year, Chinese companies exported 78,700 commercial vehicles, including trucks and buses, a decline of 5.3 percent from the same period last year.

But companies that export to Southeast Asia are reporting more impressive results.

Dongfeng Liuzhou Motor Co, a major truck manufacturer based in the Guangxi Zhuang autonomous region, reported that its sales volume in this market has grown more than 100 percent compared with three years ago.

Last year, Liuzhou Motor exported 2,922 vehicles, mostly trucks, with turnover of $101 million. Its major export destinations are Vietnam, the Philippines and Myanmar.

During the first three months of this year, Liuzhou Motor received orders of 1,864 trucks from Vietnam. The company estimates that the first half-year order will easily reach 3,000 units.

DongYang, secretary-general of the CAAM, said the surge is fueled by Southeast Asian countries' huge demand for trucks, which in turn has been generated by their large-scale infrastructure plans.

"Where there is massive infrastructure construction, there is a demand for trucks," he said.

According to Indonesia's long-term economic development plan, for example, the country aims to complete 370 major infrastructure projects, including ports, railways and highways, by 2025.

Analysts said that the "Belt and Road Initiative" by the Chinese government, which focuses on improving connectivity along the historic land and maritime Silk Roads, has further boosted demand, as major infrastructure may be involved.

The process may be further fueled by the establishment of the Asian Infrastructure Investment Bank, which aims to fund infrastructure construction in Asia, Dong said.

Zhou Shaohua, general manager of import and export at Liuzhou Motor, said there are several reasons that the company is making the Southeast Asian market a priority.

"First, it is close to our manufacturing base in Guangxi, so transportation costs are lower," he said. "Second, the annual China-ASEAN Expo in Guangxi provides a plat-form for Liuzhou Motor and Southeast Asian clients to keep in close contact."

Recent government policies in some of the member countries of the Association of Southeast Asian Nations have also, in a way, helped Chinese truck exporters.

In Vietnam, for example, truck overloading used to be a common problem on the roads, as drivers can earn more money by loading more cargos and making fewer trips. But in the past few years, the new minister of transportation has introduced stringent penalties for truck drivers. As a result, cargo that took one truck to transport in the past now requires two or three vehicles, leading to a rise in demand.

She Cairong, deputy general manager of Anhui Jianghuai Automobile Co, another major commercial vehicle manufacturer, said the performance of Chinese truck companies in overseas markets differs greatly from region to region.

"If the exporter targets Southeast Asia, they can expect to enjoy good growth due to the crackdown on overloading in Vietnam and the exploration of mineral mines in the Philippines. But if truck exporters target South America, they might suffer quite a big drop as a result of raised tariffs and depreciated local currencies," She said.

JAC has 15 manufacturing bases across the world, mostly assembly plants with parts imported from China. In Southeast Asia, it has one joint venture in Vietnam and two assembly plants in Malaysia.

Some truck exporters have switched their focus to Southeast Asia recently due to the optimal conditions. Since last year, JAC has strengthened its sales and marketing teams in the region to improve its after-sales services.

And recently, Xuzhou Construction Machinery Group Co, or XCMG, a heavy machinery and auto manufacturer based in Xuzhou, Jiangsu province, received an order of 100 off-highway dump trucks from Southeast Asia.

The Southeast Asian market is performing so well that Liuzhou Motor is making ambitious plans.

"The contribution overseas is just a fraction of our overall revenue," Zhou, the general manager, said. "The capacity of the whole Southeast Asian market is about 30,000 trucks, and we hope we can deliver 5,000 this year.

"We face the fiercest competition in China and still we stand out, so there is no reason we cannot expect to have a better performance in Southeast Asia," he said.

In the Chinese market, Liuzhou Motor's sales volume is growing by 50 percent every year, and it has taken a dominant role in the markets surrounding Guangxi.

Although Southeast Asia is a highlight for truck exporters, this does not mean the market is easy to penetrate. In Vietnam, for instance, Chinese trucks face fierce competition from South Korean light trucks and secondhand trucks from the United States. In the Philippines, customers prefer Japanese and US brands, so Chinese companies have to exert more efforts toward promotion.

In Myanmar, secondhand Japanese trucks - designed to drive on the left - are everywhere, even though motorists drive on the right side of the road.

To compete with their rivals, Chinese companies are racing to cater to local needs.

After the Vietnamese government introduced stringent regulations on overloaded trucks, Liuzhou Motor modified the engine and chassis of its model so the vehicle can load the maximum amount of goods without breaking the standard set. The truck subsequently became extremely popular in Vietnam.

To further reduce costs, Liuzhou Motor is in talks with local governments about potential assembly plants in Malaysia and the Philippines. These plants will be able to import parts from China and assemble the vehicles locally, so the import duty would be much lower compared with importing the whole vehicles.

"Each of the Southeast Asian markets is relatively small, but when adding them up, it is quite big. The relatively small market gives us more flexibility than in other big markets such as Russia and Brazil," Zhou said.

In China, Liuzhou Motor produces cars, sport-utility vehicles, multipurpose vehicles and trucks. Last year, the company delivered 280,000 units.

But Zhou said the company will not export other types of vehicles in the near future. "We don't know the overseas market so well yet, so we will stick with our heavy-duty trucks first," he said.

"Later we might introduce more models overseas."

Zhou added that no matter how fast the company expands, it needs to make sure that local dealers earn good money, because they are the fundamental contributors to sales revenue.