Business Report FY2006 - Wanxiang Qianchao Company., Ltd.:

Business Highlights

Performance for FY2006 (million yuan)
(in million yuan) FY2006 FY2005


Sales 3,581.59 2,829.26 - Both sales and income increased year-on-year, thanks to greater sales of high value-added products to leading automakers.
Net Profit 229.27 130.62


- In recent years, the Company has been working on localizing production and modularizing products to strengthen its OEM business. As a result of the Company starting to supply products from its new plants that were built near major automakers' facilities, sales of chassis products significantly increased. Sales also grew steadily at both the Driveline System Division and Bearing Division, which won OEM agreements from new customers.

Chassis Systems
- In December 2006, Harbin Wanxiang Hafei Auto Chassis System Co. ,Ltd., a subsidiary of the Company, established Harbin Wanxiang Automotive Parts Co., Ltd. to manufacture chassis products.
- Wanxiang Qianchao (Guilin) Chassis Parts Co., Ltd.'s new plant was completed and started operating on October 19, 2006. The Wanxiang Qianchao Group directly invested in the chassis parts supplier in 2003, which was formerly a state-owned enterprise. The new plant is expected to accelerate the growth of the subsidiary, the sales and income of which have risen significantly over the past three years.

Driveline Systems
- In June 2006, the Company's Qianchao QC universal joint was designated as a driveshaft component in vehicles made by FAW Jiefang Automotive Co., Ltd. and Beiqi Foton Motor Co., Ltd. Wanxiang Qianchao will be the exclusive supplier of universal joints to these automakers.

- In Dec. 2006, the Company's announced that its constant velocity drive shaft business marked record high performance for the January-October period of 2006. Compared to the same term last year, its production volume was up 89.18 percent, sales increased 96.5 percent, and income rose 91.3 percent, respectively. The Company, which previously focused on the aftermarket products, shifted to producing mainly products for OEMs over the past few years. This year marked the first delivery of its products to middle- and luxury-class vehicle manufacturers in China, while discussions with GM are underway. As of Dec. 2006, the company has the capacity to manufacture more than 1.2 million constant velocity drive shafts a year.

- In March, Jiangsu Qianchao Bearing Co., Ltd. started constructing a new manufacturing facility in the Zhenjiang Economic Development Zone in Jiangsu Province, seeking to make a full-scale entry into the global OEM market. The company, which has already achieved annual sales of 200 million yuan, aims to increase its annual production to 40 million sets and sales to 500 million yuan over the next three years.
- In December 2006, Qianchao Bearing Co., Ltd. announced that the Company will supply high-end axles to ZF of Brazil. The first phase of the contract is worth some 15 million yuan.
- In Dec. 2006, Qianchao Bearing Co., Ltd. was awarded an OEM contract to supply bearings to FAW in 2007. The company and FAW also agreed on a product development project, technical tie-up, and supply program, which will further expand the range of the Wanxian-group brand products to be used in FAW vehicles. The new contract marks a historic achievement in that Qianchao QC bearings were adopted instead of products made by two long standing suppliers.

Wheel Hubs
- In March 2006, Zhejiang Wanxiang Jinggong Co., Ltd. launched operations of its fifth wheel hub assembly line introduced from Korea. The new line has the capacity to assemble annually 1,074,000 sets of wheel hubs at an assembly speed of less than 20 seconds per unit.

Investment Activities

Capital Investment Projects (as of Dec. 2006)
Project Planned amount of investment (in million yuan)
Investment made in 2006 (in million yuan)
Actual Spending by 2006 as a percent of planned amount of investment Remarks
New plant construction at Hubei Wanxiang Auto Parts Co., Ltd. 30.19 20.40 95.52%


New production lines to manufacture chassis components for Chery Automobile 29.90 2.29 75.67% Setting up production lines to manufacture brakes, brake drums, steering knuckles, etc. for Chery Automobile.
New plant construction to produce chassis systems in Guilin 32.00 8.02 101.63% -
New plant construction at Zhejiang Wanxiang System Co., Ltd., Liuzhou Factory 10.00 1.21 12.10%

Constructing new plant to manufacture chassis systems for SAIC-GM-Wuling Automotive

Facility expansion project to increase steering knuckle production capacity by 80,000 units per year 27.20 19.77 83.09% -
4,000-ton Hot Die Forging Line 12.00 10.96 97.58 -
Facility expansion project to increase production capacity for third-generation wheel hubs 12.50 10.86 86.91% -