Harbin Dongan Auto Engine Co., Ltd. Business Report FY ended Dec. 2023

Financial Overview

(CNY millions)

	FY ended Dec. 31, 2023	FY ended Dec. 31, 2022	Rate of change (%)	Factors
Sales	5,404.35	5,767.08	(6.29)	-Affected by the reduction in orders from OEMs, the company's sales volume declined and operating income decreased.
Operating income	(10.79)	145.62	(107.41)
Ordinary income	4.72	149.04	(96.83)
Net income	4.69	142.99	(96.72)

New projects

-The company's first phase construction project of the new base for new energy hybrid systems has a total investment of CNY 487,883,800. At present, the main construction of the factory building has been completed, some equipment has arrived and is being installed and debugged. It is expected to be ready for production by the end of 2023.

Product development trends

-The Company announced the successful ignition of the first unit of the N25TM, a 2.5L methanol-fueled supercharged engine. In-house developed by Harbin Dongan Auto Engine Co., Ltd. (DAAE), the N25TM employs a range of advanced technologies and delivers a thermal efficiency of over 43%. In Heilongjiang, a major grain and timber province with a large amount of available agricultural and forestry residues such as straw every year, around 20 million tons of biomass methanol (green methanol) can be converted annually on average. With the N25TM as a starting point, DAAE will gradually establish a new platform consisting of alternative fuel engines. (From a DAAE press release dated April 12, 2024)

-The Company announced the successful ignition of the M15NTE engine. Coming with features such as an ultra-high compression ratio, deep Miller cycle, a fully variable oil pump, exhaust manifolds integrated in the cylinder cover, and a deeply optimized wear reduction structure, the engine delivers a thermal efficiency of 42% and meets the requirements of the Phase V fuel consumption limit for passenger vehicles and the Phase IV fuel consumption limit for commercial vehicles. (From a DAAE press release dated January 25, 2024)

-The Company announced that it successfully start the N20TDE engine at its research institute of extended range powertrain systems. The N20TDE engine features extremely high compression ratio, deep Miller cycle, high tumble air passage, cylinder head with integrated exhaust manifold, LP-EGR (low pressure exhaust gas recirculation) and greatly optimized anti-wear structure. It achieves a thermal efficiency in excess of 43%. It will be mainly applied to large hybrid passenger vehicles. (From a press release dated December 28, 2023)

-The Company announced the successful ignition of its first DASP1200 high-torque RWD 8-speed automatic transmission. DASP1200 encompasses two power takeoff interfaces and delivers an input torque of 1,200Nm and a torque density of 8Nm/kg. It is applicable to high-load models such as medium and heavy trucks, buses, engineering machinery, and special-purpose vehicles. The product is expected to achieve an annual sales volume of over 100,000 units and a sales of over CNY 3 billion. (From a Dongan Auto press release dated December 14, 2023)

-The Company's M16NE and M16NL engines based on the M series high-efficiency engine platform have been successfully started. As upgraded products based on technical solutions of the existing M series high-efficiency platform, the M16NE and M16NL high-efficiency engines feature lightweight materials such as aluminum alloy in the engine cylinder block, and boast an ultra-high compression ratio of 14/15, dual-injection airways, deep Atkinson, high-tumble airways, integrated exhaust manifolds in the cylinder heads, and deeply optimized wear reduction structures. With the support of technologies such as high-efficiency cooling EGR and high-energy ignition, the engines achieve the high targets of engine thermal efficiencies of over 41% and 42%, meeting the requirements of the Phase V fuel consumption limit for passenger vehicles and the Phase IV fuel consumption limit for commercial vehicles. The M16NL and M16NE engines target the markets of conventional commercial vehicles and new energy commercial vehicles, respectively. (From a Dongan Auto press release dated January 31, 2023)

Orders

-The Company announced that the M16N engine for the Forland W1 project is in mass production at its new site for New Energy hybrid systems and will be equipped in the Forland Xiangling Q mini-truck. The M16N engine, the first product based on the 2^nd-generation M series high-efficiency platform, is designed in accordance with Phase IV fuel economy regulations for commercial vehicles of Category N1 and Phase V fuel economy regulations for passenger vehicles. (From a Dongan Auto press release dated August 9, 2023)

-The Company announced that in Q2 2023, it received designation agreements from 16 automakers whose names cannot be disclosed due to confidentiality. According to the agreements, the company has become the supplier of powertrains, New Energy range extender systems, hybrid systems, gas engines, automatic transmissions, and dedicated hybrid transmissions to 23 projects of the above customers, with an estimated lifecycle sales volume of 1.35 million units. (From a Dongan Engine SSE press release dated July 4, 2023)
　

R&D expenditure

	FY ended Dec. 31, 2023	FY ended Dec. 31, 2022	FY ended Dec. 31, 2021
R&D expenditure (CNY millions)	293.87	291.60	324.92
R&D expenses as percent of sales(%)	5.44	5.06	4.93

-As of Dec. 31, 2023, the Company has 505 R&D staff, accounting for 15.86% of the total staff.

-In 2023, the company participated in the formulation of 3 national standards and 5 industry standards, and applied for 176 patents.　

Acquired Beijing Zhiyue Engine Co., Ltd. and renovated its production line

-The Company announced that Beijing Zhiyue Engine Co., Ltd. (Beijing Zhiyue), a joint venture (JV) between it and Foton Motor, intends to launch a project for revamping the production lines of the G01 engine. With a total investment of CNY 218 million and a construction cycle of 18 months, the project will revamp the G01 engine production lines into producing Dongan Auto’s N20 series engines to meet the demand of the Class N1 large equipment, Class N2 low equipment, and pickup truck markets for high-displacement gasoline engines as well as the demand of Foton Motor commercial vehicles for gasoline engines and new energy. Upon completion of the project, the capacity of N20 products will reach 180,000 units per year, while a G01 capacity of 10,000 units per year will be retained. (From a Dongan Auto SSE press release dated April 29, 2023)

-The Companyannounced that it has signed a strategic cooperation agreement with Beiqi Foton Motor Co., Ltd. (Foton Motor). Dongan Auto intends to acquire a 60% stake in Beijing Zhiyue Engine Co., Ltd. (Beijing Zhiyue), a Foton Motor subsidiary, after which Beijing Zhiyue will become a joint venture between Dongan Auto and Foton Motor. Concurrently, Foton Motor will participate as a strategic investor in the subscription of shares issued by Dongan Auto to specific targets to become a shareholder of the company. In addition, according to the agreement, the two parties will strengthen cooperation in energy saving and emission reduction of gasoline engines (including hybrid ones) for commercial vehicles. (From a Dongan Auto SSE press release dated March 1, 2023)