Kunming Yunnei Power Co., Ltd. Business Report FY ended Dec. 2021

Financial Overview

(CNY millions)

	FY ended Dec. 31, 2021	FY ended Dec. 31, 2020	Rate of change	Factors
Sales	8,029.55	10,008.74	(19.77)	-Affected by multiple factors such as the switch to China-6 emission regulations, the slowdown in demand of commercial vehicles and the shortage of ECU chips for Chinese domestic automotive engines, the Company's engine production and sales were reduced, resulting in a decline in operating income.
Operating income	57.72	235.05	(75.44)	-Raw material price hikes throughout the year reduced engine profit margins. -The Company increased its investment in R&D.
Ordinary income	56.80	235.09	(75.84)
Net income	74.93	228.86	(67.26)

Business News

The first direct-injection light-duty commercial vehicle gasoline engine rolled off the production line
-The company's G20 commercial gasoline engine was officially launched in July 2021, marking Yunnai Power's move from the traditional diesel engine market to the gasoline engine market and the diversification of the company's business. The product has advantages including high thermal efficiency, high power at low speed, superior acceleration, excellent fuel consumption range and durability. It has the power and fuel consumption of a diesel engine and the comfort of a gasoline engine, and is suitable for pickups and light-duty trucks trucks. At present, customers include Foton, JAC, Dayun, Shandong Wuzheng Group, and Namjun Auto. It is expected that the sales of G20 gasoline engine will exceed 200,000 units by 2023. (From several media sources)

Expansion of heavy-duty engine business
-The parent company, Yunnan Yunnei Power Group Co., Ltd., completed the acquisition of 60% equity interest in Taiyuan Jiangling Power Co., Ltd., a wholly-owned subsidiary of Jiangling Automobile Co., Ltd. After the completion of the transaction, Jiangling will still hold 40% equity interest in the company and Taiyuan Jiangling Power Co., Ltd. will be renamed as Shanxi Yunnei Power Co., Ltd. Through this transaction, the two parties will jointly expand their heavy-duty engine business in the future. (From a press release dated November 23, 2021)

Gasoline engine manufacturing and sales subsidiary established
-In 2021, the Company and Chongqing Zhuojian Trading Co., Ltd. jointly established Chongqing Banggao Power Technology Co., Ltd. The new company has a registered capital of CNY 30 million and is mainly engaged in the production and sales of gasoline engines. Yunnei Power holds 60% of the shares and has included it in the scope of consolidation. (From the 2021 Annual Report)
　

Patents

-As of December 31, 2021, the Company had 265 valid patents in the field of engines, including 172 utility model patents, 63 appearance patents and 30 invention patents. In the field of industrial grade electronic products, the Company has 46 valid patents, including 35 utility model patents, 5 appearance patents and 6 invention patents. (From the 2021 Annual Report)
　

R&D Expenditure

(CNY millions)

	FY ended Dec. 31, 2021	FY ended Dec. 31, 2020	FY ended Dec. 31, 2019
R&D Expenditure	620.76	413.83	478.10
Ratio of R&D expenses to sales	7.73	4.13	7.02

-As of Dec. 31, 2021, the Company has 319 R&D staff, accounting for 12.07% of the total staff.

R&D structure
-The Company has established a “one department and five center" framework, consisting of the Science and Technology Management Department, Kunming Technology Center, Information Center, Eastern Technology Center, Chengdu Gas Development Center and Shandong Technology Center. In addition, it has set up four R&D centers, one each in Kunming, Chengdu, Wuxi and Shandong.

Facility	Location	Services
Technology Management Department	Yunnan Kunming	R&D project management, technology management
Kunming Technical Center		Product engineering prototype development
Information Center		Information management
Chengdu Gas Development Center	Sichuan Chengdu	Natural-gas-engine development, off-road-vehicle development
Eastern Technical Center	Jiangsu Wuxi	Product design, aftertreatment assemblies, calibration of engines and complete vehicles, powertrain for New Energy Vehicles
Shandong Technical Center	Shandong Qingzhou	Development of off-road vehicles

Industry-University Collaboration Project
-The project members include FEV Engine Technology, Bosch, Beijing University of Technology, Tongji University, Kunming University of Technology and other domestic and international companies and universities.

Research Facility Name	Partners	Partnership Details
FEV High Altitude Engine Test Laboratory	FEV Motorentechnik GmbH & CO. KG	Joint development of diesel engines.
Yunnan Power Equipment Industry-Academia-Institute Joint Research and Development Center for Research and Development of Power Equipment Products	Kunming University of Technology	Development of diesel engines for light-duty commercial vehicles.
Internal Combustion Engine Engineering Centre of Beijing University of Technology	Beijing Institute of Technology	Development of electronically controlled high-pressure common-rail diesel engines for small vehicles.
Su Wanhua Academician Workstation	Tianjin University	To make the four-valve, electronically controlled, high-pressure, common-rail diesel engine developed by Yunnai Power comply with the China-4 Regulation so it can be used in light-duty commercial vehicles.
Combined Engine Laboratory	Tongji University, Shanghai Electric Power Driving Co., Ltd.	Joint development of hybrid powertrains for passenger cars.
China Automotive Research & Testing Center (Kunming) Co.	China Automotive Technology Research Centre Limited Yunnan Precious Metals New Materials Holding Group Co., Ltd.	Testing of vehicles and components.

Investment in China

-In order to comply with the China-6 emission standards, the Company will invest CNY 50 million more in its wholly owned subsidiary Chengdu Yunnai Power Co. Ltd. The purpose is to improve Chengdu Yunnai's production line that builds energy-saving and environment-friendly high-efficiency engines. Chengdu Yunnai's main business is the production and sale of YN90 diesel engines. (From an April 29, 2021 press release)

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