Resisting the downside risks of the automotive industry Weichai Power seeks to diversify its earnings

The risk of a downturn in the auto industry has begun to affect parts suppliers that are upstream of the industry chain.

At present, China's largest powertrain enterprise group, Weichai Power, is looking for new business growth points beyond heavy-duty diesel engines in order to increase its ability to withstand such risks.

Tan Xuguang, chairman of Weichai Holding Group Co., Ltd. (hereinafter referred to as “Weichai Holdings”) told the “First Financial Daily”: “Weichai Power has other resources in the product structure, including resources for construction machinery and marine engines. Can coordinate and coordinate."

Zhang Baoding, deputy secretary of Weichai Holding Party Committee, told reporters that the company positioned gas engines, remanufacturing, and power generation equipment as new growth points for subsequent production.

Due to the continuous increase in raw material costs and the steady year-on-year growth of the heavy commercial vehicle market, Weichai Power has soberly realized that it is looking for business growth points other than heavy-duty diesel engines in order to withstand the downside risk of the heavy-duty truck market.

Zhang Quan, CEO of Weichai Power Co., Ltd., told reporters that although the company's active adjustment of product structure, although heavy-duty diesel engines still account for the largest proportion, it has reduced the proportion and increased the proportion of power generation equipment and other products.

“This is the long-term strategic adjustment of Weichai Power, mainly for the extension of the industrial chain, improving economic efficiency, and improving the ability to avoid risks,” he said.

Just last week, Weichai Power had made substantial moves in the field of gas engines, one of the new growth points: the company signed a joint venture agreement with Canadian Westport Communications Corporation and Hong Kong Pei Xin (China) Investment Co., Ltd. The three parties will jointly establish Weichai Power Westport New Energy Engine Co., Ltd.

According to the agreement, Weichai Power Xikong New Energy Engine Co., Ltd. will invest 150 million yuan to develop and manufacture high-power, high-speed heavy-duty LNG engines using LNG direct injection technology.

The reason why gas engines, remanufacturing, and power generation equipment are the new growth points is mainly attracted by the market potential of these three products.

According to Zhang Quan, in the field of gas engines, there has been a significant increase in the current sales of products. "Gas engines have low cost, low pollution, easy to meet the national III, national IV standards, in line with the national automobile industry policy, the market is very large."

He told reporters that at present, Weichai Power can produce and sell thousands of gas engines for the whole year, which is mainly provided to some domestic passenger car companies such as Yutong and Jinlong. “Originally these passenger car companies used more imported engines and they had higher prices, and our products had an advantage in terms of price. In terms of service networks, the network of gas engines could be shared with existing heavy-duty diesel engines, making it easier to maintain and maintain. ."

Power generation equipment is a traditional product of Weichai Power. But Zhang Quan said: "In recent years we have discovered that new markets have not been involved before, such as the communications company's network station, although the country has just risen, but the market is very large."

“Foreign power generation equipment companies have developed earlier and some companies have already established production bases in China.” He explained, “However, Weichai Power has the characteristics of product diversification. Weichai Power has its own engine products, and other Power generation equipment manufacturers also need to purchase from other engine factories, so this is a great advantage for Weichai Power, and it will be more convenient for maintenance and spare parts.”

Remanufacturing is an emerging technology in China. Zhang Quan believes that there is potential for growth in the future. "For example, after an engine reaches the overhaul period, it will recycle its usable parts and remanufacture it into a new engine, which is lower in selling price than similar new products. This can extend product life and reduce consumption."

Zhang Quan told reporters that in order to expand the above three businesses, Weichai Power Sales and Marketing Corporation has increased the number of relevant personnel of about 170 people since 2005.

In addition, Zhang Baoding disclosed to reporters that currently the development of gas engines and power generation equipment has begun to take shape, and that power generation equipment will be built into a brand of Weichai Power; remanufacturing projects are also under preparation.
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