From tenacity to compromise on the 10-year joint venture process of Daimler commercial vehicles in China

The joint venture journey of Daimler in China has been anything but smooth, marked by long negotiations and complex challenges. The partnership with Yaxing lasted four years, while the talks to establish Fujian Daimler Automotive Industry Co., Ltd. stretched over six years, and the collaboration with Foton Motor also took five years to materialize. These extended periods of negotiation often led to frustration, as seen in several failed attempts before successful ventures were finally realized. After four years of intense discussions, Yaxing and Daimler-Benz (now Daimler) formed Yaxing-Benz in 1997, a 50-50 joint venture with a total investment of $95.5 million. The plan was to build two production lines for Mercedes-Benz and Yaxing passenger cars. This joint venture was one of the outcomes of high-level visits to Germany and was widely anticipated by the public. Initially, the business scope of Yaxing-Benz included non-urban buses over 8.2 meters, while subsidiaries of Yaxing Passenger Vehicles Group produced both non-urban and city buses under 8.2 meters. However, the project faced significant setbacks. In the early stages, Yaxing-Benz introduced four high-end passenger vehicles ranging from 8 to 12 meters. But since these buses were mostly imported from Mercedes-Benz, with only minimal local assembly, the localization rate was below 2%. Additionally, the products were not yet mature, leading to poor market reception. Only the YBL6120 model managed to stay in production, while the other three models were eventually discontinued. According to insiders, the real issue lay in the struggle for control between the two parties, which ultimately caused the joint venture to collapse. In contrast, the cooperation with Foton Motor proved more successful. After years of negotiations, Daimler and Foton signed an agreement that allowed for the development of commercial vehicles under the Futian Auman brand. One key change was that Daimler gave up the production of Mercedes-Benz heavy trucks in the joint venture. This shift was partly due to the limited market demand for high-end Mercedes-Benz heavy trucks in China, making it economically unfeasible to invest in new production lines. Earlier, Daimler had also explored a joint venture with FAW Group, but the deal fell through because Daimler insisted on abandoning the "Liberation" brand, which FAW refused to accept. This highlights how Daimler's initial stance sometimes clashed with local partners' expectations. So why did Daimler choose to compromise this time? Industry sources suggest that the Mercedes-Benz brand in the heavy truck segment wasn’t performing well in China, and building a new factory would have been too costly. Moreover, Daimler’s previous joint ventures in China hadn’t delivered strong returns, so the company needed to focus on opportunities in the fast-growing commercial vehicle market. The Chinese government’s push for self-owned brands also played a role. By supporting the Futian Auman brand, Daimler could gain better access to government incentives and ensure the success of its projects. Through careful analysis of the Chinese market, including policy trends and economic conditions, Daimler made strategic concessions to secure long-term growth in the region. This evolution shows how Daimler adapted its approach in China, learning from past failures and aligning with local interests to achieve sustainable success.

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