Lifan, Brilliance Xinyuan (Shineray) and BAIC Yinxiang, three companies that started as motorcycle companies and at one point decided to go into the car business. With varying degree of success, I should add. Today another one of such companies: Dayun from the northern province of Shanxi.
The long way down
In September 1987 a motorcycle shop opened on Jiefang North Road in Yuncheng District, Shanxi. This is the first line in the history section of Dayun’s official website. It looks like quite a logical starting point for a company that today produces thousands of motorcycles each week. But it isn’t the entire story. To get a better idea of what really happened, let’s meet 18-year-old Yuan Qinshan.
It’s the New Year’s holiday in 1986. Yuan has finished junior high school the year before and worked as a ‘grain dealer’ since. He and a couple of friends traveled around the county collecting grain and reselling it at the grain management office. It made him 200 yuan. Yuan was one of six siblings in a not-so-developed part of the country, so he was used to poor living conditions and lack of food. But his earnings disappointed him. He didn’t have the scale and transportation capacity to grow the business. And then one of his cousins, who worked in southern Guangzhou, showed up for the holidays.
On a motorcycle!
Motorcycles were luxury goods in Shanxi, not attainable for common citizens like Yuan. How could his cousin afford a brand new one? Neighbors and acquaintances from surrounding townships all came by to see the iron horse. He also saw immediate possibilities. Replacing his bicycle with a motorcycle would extend his range and vastly increase his transportation capacity. Yuan was envious and curious at the same time.
During the holiday he took rides with his cousin, sitting on the back of the motorcycle. On the rides out of town, they attracted the envious looks of the people they passed. He noticed it. He asked his cousin how he could afford the machine.
The cousin answered: “they’re cheaper in the south”.
“How much then”, asked Yuan.
“They cost about 3000 yuan”, replied his cousin.
And Yuan started to wonder. Could he make money selling motorcycles?
Exactly one year later, during the 1987 New Year’s holiday, Yuan decided to go for it. He had worked hard the entire year, trading grain. He had 3000 yuan in his pocket and bought a train ticket to Guangzhou.
The long way up
So we find our teenage boy alone in the big city. It might be an overwhelming experience for many, but Yuan is there with a clear target. He wanders all around town, visiting motorcycle dealerships and markets, only to find out his cousin might not have told the truth entirely. He can’t find a bike priced below 5000 yuan.
Reluctant to go back empty-handed Yuan keeps wandering around the city and finally ends up at a wholesale market in the Xintang neighborhood. There he sees what a needs, a Jialing JH70 motorcycle. It has a small, but frugal single-cylinder engine that delivers about 5 horsepower. Yuan keeps working the salesman and finally they make a deal: Yuan can have the bike for 2000 yuan. The salesman even promises him to sell him the same type of motorcycle for the same price in the future.
Now it’s time to go back to Yuncheng. Yuan doesn’t want to pay the commission to transport the bike by train. So what to do? He doesn’t have any experience riding a motorcycle, doesn’t have a helmet, let alone a drivers’ license. And the trip is 1800 kilometers (1100 miles) in still cold winter conditions. After some hesitation, Yuan decides that if his cousin can do it, so can he. He sets off for the trip wearing three layers of clothes, only stopping for a short nap or some instant noodles. After riding for six days and five nights he makes it home safely.
The Jialing stirs quite a fancy in his village. People come out to see it and Yuan sells it for a few hundred yuan profit at the local market the next day. He feels that all the hard work had been worth it and that he had potentially a very lucrative business on his hands. He slept at home for two days straight and then he was back on the southbound train to Guangzhou.
By the way, you can still buy a brand new Jialing JH70 motorcycle on Alibaba today for less than $400.
The long way around
This became Yuan’s life for the next few years. Take the train to Guangzhou, buy a motorcycle, ride it back home and sell it at a modest profit. It was not without danger. On one of his rides back north, Yuan was caught out by a blizzard in the Hunan mountains and nearly succumbed to exhaustion. But he survived and his business thrived. On later runs, he invited friends to join him. His friends made a little money, he had a higher trade volume.
Simultaneously he tried to establish something of a distribution network and he opened a small repair shop in Yuncheng. This is probably the shop the Dayun website refers to. But it takes until 1991 before he becomes a ‘real’ motorcycle retailer. Then he founds the Yuncheng Industrial & Commercial Tongda Economic & Trade Company (don’t ask me how he came up with that convenient name). He no longer relies on human labor to get the motorcycles, they arrive straight from the factory.
His repair shop quickly gains a solid reputation: affordable prices and excellent quality. But Yuan doesn’t make the same profit margins as his direct competitors. First because of the cost of service and second because his scale is too small to qualify for the largest manufacturer discounts. He even starts selling the sturdy wooden crates the motorcycles are shipped in, to people who have a use for it and gains a secondary line of profit. He also starts to expand, opening new stores throughout Shanxi province and later the whole of China. And he makes deals with many manufacturers, both domestic like Jialing or Dayang, and also with international brands like Yamaha and Honda.
In February 1997 all his efforts are jointly incorporated as the Shanxi Tongda Group. There were only 10 years between selling his first motorcycle and becoming the largest dealer in Shanxi. Despite the revenues and profits are rising quickly, Yuan soon faces a new challenge. The federal government introduces tighter regulations for the motorcycle trade, which leads to smaller benefits granted by the manufacturers. So his margins are under pressure once again. He figures he needs to build his own motorcycles.
One of the brands in his stores is Dayang, maker of heavy tricycles used by farmers, construction workers or market salesmen. The Dayang brand is made by Luoyang Yichu Motorcycles, a joint venture between China South Industries (large defense conglomerate and parent company of Changan) and Charoen Pokphand (CP) from Thailand. CP originated in the food industry, but also has a large moped and motorcycle business in its home country. CP already tried to enter the Chinese motorcycle market (besides the tricycles), but finds it difficult to do so as a foreign company.
Yuan Qinshan and CP do a mutually beneficial deal. Tongda Group acquires the rights to the Dayang brand for tricycles and the yet unused Dayun brand for motorcycles from CP and will build a new factory for production. Due to the support and technical assistance of CP, Guangzhou Dayang Motorcycle (established December 1999) starts as a domestic first-class motorcycle manufacturer with six fully automatic assembly lines that can produce more than 50 models and an annual capacity of more than 2 million units. Low brand awareness causes a slow start, but in 2001 Yuan Qinshan gets involved hands-on, starts a clever marketing campaign and a few years later the combined output of Dayang and Dayun products indeed reaches two million units.
Tongda Group also diversifies into different areas. It sets up a real estate branch and invests in a road freight company and an ocean shipping company. More importantly, car sales start to enter a boom period around the change of the century and Tongda Group does the dealership thing all over again, now with cars. The Group concludes a long list of deals with manufacturers like Changan, Great Wall, Citroen and Volkswagen and creates a large network of car dealerships.
With the motorcycle business pretty much sorted, Yuan begins to look for other opportunities, also because the motorcycle business is quickly becoming a saturated market. His car dealerships include deals with FAW Jiefang and Dongfeng, so he sells some commercial vehicles as well. And the next expansion of the Tongda Group is in this area. In 2004 the company announces the start of construction of a new factory for heavy trucks in its hometown Yuncheng. The operating company for this factory is established in 2007 and is called Shanxi Dayun Automobile Manufacturing.
This is also the time Yuan Qinshan streamlines and re-brands its corporate structure. He creates a new holding company Dayun Group in 2009. The Dayun name will now be used throughout the structure. The Group has three main pillars.
- Shangxi Tongda Group holds the activities in real estate development and freight logistics, but most activities relating to the distribution and sales of vehicles are now removed from this company.
- Guangzhou Dayun Motorcycle is a newly established intermediate holding (2008) that becomes responsible for all motorcycle-related activities. It includes the factory in Guangzhou. It also holds a factory in Luoyang for a while (now sold) and later erects a factory in Yuncheng as well.
- Shanxi Dayun Automobile Manufacturing is the company responsible for automotive activities. First mainly sales and distribution, but a truck factory is under construction.
The creation of Dayun Group coincides with a big boost for its truck business. In March of 2009, Dayun Group acquires Sichuan Yinhe Automobile Group, a small truck maker located in Chengdu. A short rundown of the history of this company is as follows. The origins of this company are the state-owned Sichuan Highway Equipment Factory, established in 1965 and making construction equipment for most of its life. In the late 1990s, the company starts assembling light trucks under the Chuanlu brand and changes its name to Sichuan Guangcheng Vehicle Manufacturing in 1999. Five years later it becomes part of the privately-owned Guangxi Yinhe Group, a large industrial company specializing in power transmission, electronic control equipment and biopharmaceuticals. The truck maker thus becomes Sichuan Yinhe Automobile, but Yinhe (Galaxy) Group quickly realizes trucks are not their core business. So Sichuan Yinhe is sold on to Dayun, who renames the company once again to Chengdu Dayun Automobile Group. Chengdu Dayun becomes a subsidiary of Shanxi Dayun.
Shanxi Dayun assembles its first truck later in 2009, with sales starting the next year. The frame of the trucks is Dayun’s own design. For the power train, Dayun closes a deal with China’s renowned diesel engine specialist Weichai Power. The cabins are Volvo, but I can’t find out if these are copies or if there is some kind of supply agreement. Neither company mentions a cooperation. The Shanxi Dayun trucks are in the heavy-duty segment.
The trucks from Chengdu Dayun are light or medium vehicles mostly based on Isuzu technology. Isuzu is a very popular source for parts and technology for many Chinese truck makers. The company builds a second factory in Shiyan (Hubei province) in 2010. Although Dayun is no threat to the large state-owned manufacturers such as FAW Jiefang, Dongfeng or BAIC Foton, the small brand does remarkably well. In terms of sales, it’s the sixth or seventh largest heavy truck maker in the country.
In 2016 Dayun reaches an agreement for technical cooperation with Mercedes-Benz trucks. The deal covers engines and cabins and strengthens the Dayun brand image. A year later it also adds some Cummins engines to the program.
The missing link
With trucks and motorcycles covered, there’s only one logical place to go: cars. In 2015 Dayun passenger cars pop up in the government’s catalog of new vehicles. The first time it’s a rebadged Jonway A380, the second time a rebadged Weichai Enranger. Dayun never mass-produces these cars. It shows however that Yuan Qinshan is already thinking about making cars. He turns his attention to the government’s regulations regarding New Energy Vehicles and decides this is a promising new area.
Yuan sets up a division for developing electrified vehicles. For trucks, he looks at both battery electric vehicles and hydrogen fuel cell vehicles. And he is contemplating electric passenger cars. Despite Dayun’s profits, he can use some money to achieve his new goals. So he prepares the company for a public offering. Shanxi Dayun is renamed Dayun Automobile and subsequently listed on the Shenzhen stock exchange in December 2016. Apparently, the IPO brings in five billion yuan in cash.
Just over two years later the first pictures emerge of Dayun’s car. It’s a small sub-compact hatchback. A few months later pictures of mid-size MPV also appear on the internet. In January 2020 both cars go on sale under the names Yuehu ES3 and Chihu EM6. The ES3 model was known as Shuaihu during development. The launch of the Dayun passenger cars does not generate a lot of media attention and it pretty much coincides with the beginning of the Covid-pandemic. Sales are slow, in the first few months, Dayun sells only slightly over 300 cars. A pickup truck, based on a Foday model, introduced around the same time, doesn’t make a big impact either.
The disappointing market response leads to a strange happening. In September 2020 Dayun organizes another launch party and presents exactly the same cars, now named Yuanlue S1 and Yuanzhi M1. It doesn’t help much. Production of the car at Chengdu Dayun increases slightly, but still, it remains in the tens or hundreds, while many of its competitors see soaring sales numbers. The Yuanlue and Yuanzhi are rather simple cars, with none of the advanced gadgetry of startups like Xpeng or Leapmotor, at relatively low prices. It’s apparently no longer what the Chinese customer desires.
To add insult to injury, Dayun’s listing on the Shenzhen stock exchange is revoked in April 2021. The de-listing follows an investigation in the allocation of funds and some accounting principles. Yuan Qinshan is back in full control, only some family members and top executives still own some equity in the company.
Over the years pretty much everything Yuan Qinshan put his mind to, worked out quite nicely. Starting with trading motorcycles and evolving his business into an industrial manufacturing company, he got the job done. When we think back to the beginning of the story, when an 18-year old Yuan rode his motorcycle across China in an attempt to make some money, we know we’re dealing with a very determined and tenacious character. The Dayun passenger car brand may not be a success now, but Yuan is not the man to give up easily.