FAW Jiefang Automotive Co., Ltd. Wuxi Diesel Engine Works -FY2006

Business Highlights

New products
-In January 2006, the Company started production of a 4-valve diesel engine Aowei, which meets Euro lll European emission regulations. It also started production in the same month of a 8.6-liter, 4-valve, common rail diesel engine, Aowei (CA6DL2-35E3), which is compliant with Euro 3. This engine with an output of 350HP is designed for heavy-duty trucks and large and medium-size luxury buses and equipped with the common rail system. The company has worked on developing this engine as a project for the new generation.

- In December, 2006, the Company launched the commercial production of the Aoba CA6DN1, a 13-liter, 4-valve common rail diesel engine for heavy-duty trucks and buses that meet the China lll emission standards. The CA6DN1 engine, which was developed jointly between the Company and the FAW technology center, incorporates Bosch's electronic common rail system and generates a maximum of 390-460 horsepower. The Aoba CA6DN1is the most powerful engine in terms of output and displacement among 4-valve engines made in China. The first new Jiefang J6 heavy-duty trucks using the CA6DN1 engine rolled off the assembly line of China FAW in August, 2007.


New diesel engines
-A prototype diesel engine A31 that was developed independently by the Company passed the engine bench test in June 2006. The A31 developed by the Company in response to the China lll emission regulations, is an electronically controlled diesel engine, which produces optimal control of diesel injection volume and timing. Its injection performance in the range of low speeds and high torque has significantly improved from previous injection systems. The new engine not only meets the Chinese lll standards, but also is potentially capable of meeting the standards lV. Furthermore, the injection system, which is Chinese made, has increased a competitive edge in terms of procurement and costs.

- The Company announced in June 2006 to put on sale an engine to meet the China lll emission standards, which are national standards equivalent to Euro lll. The engine adopts an electronically controlled common rail system developed by Bosch and Denso, which features easy maintenance, low noise, excellent low speed performance and fuel economy. It saves from 3 to 5 liters per 100 kilometers compared with previous engines. Products come in four series with a horsepower ranging from 130 to 460 HP, and can be mounted on various sized buses and trucks with an overall length between 6 meters and 13.7 meters. The engine has already passed each mounting test of such vehicle manufacturers as Zhengzhou Yutong,Suzhou King Long, Xiamen King Long, Anhui Jianghuai, Dandong Huanghai. Annual production capacity of engines to meet Chinese lll is 30,000. Engines to meet Euro lll are also under development, scheduled to be released at the end of 2006.

Clean engines
- In Dec. 2006, the Company successfully developed 40Cr conrods for 6-cylinder engines after spending one year in development activities. By making use of 40Cr material instead of relying on conventional 42CrMoA material, the company was able to reduce the unit cost of conrods by 4 yuan

- In December, 2006, the Company succeeded in starting its first engine powered by rapeseed oil. Since gasoline prices are surging and awareness about environmental issues is growing, the Company has been conducting a development project by inviting specialists from a German institute. The engine powered by recyclable rapeseed oil achieves a low level of noise and also a low level of CO, HC, and particulate matter emissions.

Development plan for 2006
-The Company will invest about 200 million yuan in engine development. For the past three years, it has spent a large amount of money for development each year, focused on development of high class engines capable of meeting Euro lll standards. The goal of developing sophisticated engines was already achieved, when the 6DL series diesel engine was put on the market in 2005. In 2006 the development focus will move to middle and low level engines meeting Euro lll standards. By the end of the year an Euro lll compliant diesel engine will be developed for the first time in China.