Daimler's planned truck alliance with China's Beiqi Foton has fallen apart, leaving Daimler looking for a new entry strategy for the Chinese commercial vehicle market.

Daimler has been trying to get truck production started in China for almost four years, according to Automobilwoche. Now the company has had to go back to the drawing board.

Beiqi Foton and Daimler had signed a Memorandum of Understanding to explore opportunities to set up a joint venture, a Daimler spokesperson told Automobilwoche. Forming a joint venture was seen as the quickest way of establishing medium and heavy truck production in the country.

The main hindrance to the project going ahead appears to be that Daimler had planned to take a 24% stake in Foton. The cost of acquiring this stake had become considerably more expensive thanks to a strong rise in the company's share price.

It appears that the Chinese authorities may also have withdrawn their support for the project because it was taking so long to get off the ground.

The failure of the joint venture means that Daimler will now probably have to start all over again in applying for permission to set up a joint venture. This can take a long time in China.

Daimler originally started discussing a joint venture with Foton in 2003. They signed an agreement to set up a joint venture and received the first permissions from local authorities. In the meantime China introduced legislation restricting the number of joint ventures a foreign company can have in the country to two car and two truck projects. Because Daimler already had a venture for buses and one for light trucks, a third venture for heavy trucks was initially blocked. Daimler was considering taking a direct share in Foton to bypass this rule.

Ironically, in the meantime Daimler has since disbanded its bus operation, so it is once again free to set up a joint truck production venture.

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