In just a decade, Chinese trailer axle manufacturer Fuwa has grown from nothing to become one of the worldwide market leaders. Now it is taking the next step, investing in a new factory that will double the company’s current capacity.

The city of Shunde, in the heart of the Pearl River Delta in southern China, is home to many entrepreneurial businesses, which have sprung up like bamboo in this area in recent decades. Shunde is conveniently located an hour’s drive from Guangzhou and two hours by ferry from Hong Kong, which makes transport easy for both customers and suppliers. In terms of gross domestic product, Shunde ranks among the top cities in China for its size and population, which is around 3 million.

One of the most successful local companies is a family-owned business, Guangdong Fuwa Engineering Manufacturing Co. Ltd. The company was founded in 1997. Now, just some 10 years later, it has become one of the world’s largest trailer axle makers.

In Cantonese, fuwa means “to enrich China” or “to make China prosperous,” and that is a good description for what founder and chairman Wu Zhiqiang has done.

Amy Wu, his daughter, who is running Fuwa’s daily operations, explains how the company has been able to go from nothing to 2,500 employees and an annual turnover of 3 billion renminbi (330 million euros) in a decade.

“My father is spot on when it comes to market opportunities,” she says. “We make good use of the lower cost of manufacturing in China to reach out to a global market. We have always emphasized product research and development, good people and good product quality. In the meantime, we have invested aggressively in machinery to ensure top efficiency in manufacturing and the best performance of the products. Offering competitive prices to our customers is an important business philosophy for Fuwa. We also started our export business at an early stage.”

To further expand the business, Fuwa has invested 1,365 million renminbi (150 million euros) in a new state-of-the-art factory in Taishan, just over an hour’s drive from Shunde. “Our investments are always all self-funded,” says Wu. “Our company has never borrowed a single cent from the banks.”

As a result of China’s booming economy, Fuwa started out supplying the domestic market with axles, trailer landing gears, suspension systems and other products for trailers. Today, Fuwa has a dominant pos-ition in the Chinese trailer axle market, with an impressive 70 percent market share.

As the business grew, the original factory became too small for the burgeoning demand, both domestic and foreign, and in 2004, Fuwa invested in the factory close to Shunde. This new site also included a private seaport for convenient shipments.

Today, Fuwa exportsto some 40 markets and has established a wholly owned subsidiary in Australia, Fuwa K Hitch, with sales offices in Melbourne, Brisbane and Perth, and another one in Singapore.

Trailer axle requirements differ around the world, so when Fuwa enters a foreign market, it always recruits engineers from that market to increase its know-how in terms of product design and quality control.

Not only do technical standards vary from market to market, but product application conditions vary as well.

“In total, we produce around 1,000 different axles,” says Scott Tan, Fuwa project manager. “For example, in China and in developing countries, there are many poor roads, so the axles have to be constructed with heavy-duty components to perform well even under these difficult conditions, while in the US, where the roads are normally much better, the components used are slightly different. The product structure and conse bild uration varies in different countries based on their applications.”

Fuwa produced 600,000 axles in 2007, dropping to 500,000 in 2008 in keeping with a retracting automotive market. The company also manufactures other products, including 200,000 landing gears and 100,000 air suspension systems per year, some of which are licensed for other well-known brands in the industry.

In addition to being market leader in China, Fuwa is also the market leader, or has “considerable” market shares in many regions around the world, including Australia, Southeast Asia, South America, South Africa and the US.

The new site in Taishan, which will be inaugurated in late 2009, will be almost double the size of the Shunde site in terms of production, adding another 600,000 trailer axles to Fuwa’s annual capacity, as well as introducing new products, such as drive axles and front axles for trucks.

“Taishan has a very good investment environment, and it is close to Shunde,” says Wu.

China is buildinga nuclear power plant in Taishan. The local government has welcomed Fuwa’s investment and has promised to give the company a direct power supply.

“It will be a top-class factory, equipped with advanced machinery from all over the world, including an advanced painting system,” says Wu. “The factory setup is in accordance with European standards. We will produce products similar to what we produce in Shunde, but since we have started to target the European market, mostly high-end products will be manufactured in Taishan.”

An agreement worth waiting for

In 1997, SKF started to supply the then newly founded Fuwa with German-made bearings. But a few years later SKF lost the business to a price-competitive competitor.

In 2005, SKF’s truck unit in Asia renewed a closer contact with Fuwa.

“At the end of 2006, we were requested to propose a seal that could meet Fuwa’s requirements,” says Ulrich Selig, head of SKF Truck Sales Asia, based in Tokyo, Japan. “It took us two years to find the right seal – one that had long service life, strong performance, high quality, compatibility, exchangeability and, in the end, price.”

He and colleague Steve Fu, deputy head of SKF Truck Sales Asia, based in Shanghai, frequently visited Fuwa during that time.

Finally, in November 2008, SKF and Fuwa reached an agreement. The resulting three-year contract, which went into effect in 2009, calls for SKF to deliver 600,000 wheel-end seals to Fuwa annually. The seals will be produced in the SKF factory in Wuhu in the Anhui province.

“We are targeting export markets and were looking for more advanced products,” says Amy Wu, responsible for daily operations at Fuwa. “SKF is a well-known brand, and we found that their Scotseal solution offered more benefits, such as significantly longer service life, overall high quality and strong performance.”

The seals contract also reopened the door for a new bearing contract. In January 2009, SKF was able to close a deal to supply Fuwa with tapered roller bearings for the company’s trailer axles aimed for export markets in Australia and North America.

This three-year contract involves supplying 300,000 bearings per year. They will be imported from SKF factories outside China.

Wu Zhiqiang, founder and chairman of Fuwa, said in a statement when the bearings deal was announced in early 2009: “SKF can truly support us on a global basis for our new product developments such as steer axles. It feels like Fuwa is in very good hands, cooperating with SKF to develop our global expansion.”