Weichai Power Co., Ltd. FY2007

Business Highlights

Business results for FY2007 (in million yuan)
  FY 2007
Sales 29,260.97
Operating profit 3,206.14
Ordinary profit 3,277.65
Net income 2,798.08

Acquisition of Torch Automobile Group Co., Ltd.
In April 2007, the Company absorbed Torch Automobile Group Co., Ltd., a leading auto parts supplier, in April, 2007. After each of Torch's shares were exchanged into one share of the Company's A-class shares, Torch Automobile was de-listed from the stock market. Weichai Power, on the other hand, became listed on the Shenzhen Stock Market after the equity transactions had been completed.

Joint-venture projects
- In August 2007, the Man Group of Germany and Weichai Power Co., Ltd. signed an agreement to establish a joint-venture company to manufacture engines. The two companies initially formed an alliance in the area of commercial vehicles in 1993. Weichai uses the Man Group's technology in its engines used in trucks that are 14 tons or more.

- In October 2007, Weichai Power Co., Ltd., Westport Innovation Inc., and Peterson Holdings signed an agreement outlining their establishing a joint-venture company to develop and manufacture internal combustion systems using alternative fuels for automobiles, power generators, and vessels. The new company will serve as China's first developer and supplier of environmentally friendly, high-power, new fuel engines for heavy-duty vehicles and public transport busses. Westport Innovation Inc. is one of the leading companies in the gas-engine industry. It offers high-pressure, direct-injection technology especially for use in high-power gas engines with a displacement of 10 liters or more. Weichai Power, on the other hand, has a large share of the high-power engine market.

Licensing of technology
- In June 2007, Shaanxi Hande Axle Co., Ltd., a subsidiary of the Company, signed a contract with Asia MotorWorks Ltd. (AMW) of India. Under the agreement, AMW plans to build a new axle plant with an annual production capacity of 120,000 units, and Shaanxi Hande Axle will provide AMW with support in the area of plant designing and production process engineering. Shaanxi Hande Axle will also license to AMW axle technology that caters to the Indian market. AMW will initially import completely build-up (CBU) axle units, and later shift to assembling semi knockdown kits (SKD) and CKD (completely knockdown) units, aiming to manufacture all parts in India in the future. AMW is a subsidiary of the Essar Group of India, manufacturing heavy-duty commercial vehicles and automotive components. AMW has also launched development activities on light-duty commercial vehicles.

Entering 12-liter engine market
- In October 2007, Weichai Power Co., Ltd. rolled off and shipped its 10,000th WD12 engine at its new plant. The Company achieved its annual target to produce and sell 10,000 WD12 engines only a year after the production launch in October last year. The company has already sold 10,000 WD12 engines. The first 12-liter engine model made in China has successfully entered the large engine (over 12-liter and 380-horsepower) market in China, which had virtually been dominated by foreign brands.The company is expecting to win program business for 30,000 units next year and 50,000 in 2009.


R&D structure
- The Company has R&D centers in China and Austria.
- Its Europe Technical Center, which was established in October 2003 with an investment of 100 billion yuan, developed Landking lll engines by using advanced technology provided by AVL. The new engines meet China lll emissions standards.

Recent developments
Developing new engines compliant with China lV emissions regulations
- Weichai Power Co., Ltd., which is mass-producing its proprietary Landking lll engine compliant with the China lll emissions standards, developed a more advanced engine that complies with the even stricter China lV standards in December 2007. The new engine is based on the Landking lll WP12 platform.

Developing powertrain systems for commercial vehicles
- In December 2007, the company announced that it successfully developed China's first powertrain systems for use in passenger cars and commercial vehicles. By integrating the technology of Shaanxi Fast Gear Co., Ltd. and Shaanxi Hande Axle Co., Ltd., the Group spent 6 months and more than 20 million yuan to complete the new powertrain technology. Having acquired Torch Automobile Group Co., Ltd., a parent of Shaanxi Fast Gear and Shaanxi Hande Axle, in April 2007, the Company, which is known as a diesel engine supplier, has expanded its scope of business as a comprehensive manufacturer of automotive powertrain systems.

Investment Activities

Capital investment projects for FY2007 (Automotive business only)
Project Amount invested
(in million yuan)
Establishing a facility to make steering products at Shaanxi Fast Gear Co., Ltd. 125.05 Under construction
(this facility is due to be completed in December 2008)
Revamping casting and forging plants at Weichai Power Co., Ltd. 295.73 This project was completed
Expanding lines manufacturing WD615/618 diesel engines used in heavy-duty vehicles 148.26 Under construction
Revamping production lines manufacturing WD615/618 diesel engines used in heavy-duty vehicles 103.25 Under construction
Revamping production and testing facilities at Weichai Power Co., Ltd. 113.72 Under construction

Major investment projects

1. Establishing a facility to make steering products at Shaanxi Fast Gear Co., Ltd.
In September 2007, Shaanxi Hande Axle Co., Ltd. started commercial production at its new plant in the Xi'an Economy and Technology Development Zone Jingwei Industrial Park. The new facility is built on 50,000 square meters of land with an annual production capacity of 70,000 single reduction drive axles and 50,000 steering front axles. In addition to its five production lines (a hot stamping line for axle housings, a welding line, a drive axle assembly line, a front shaft assemble line, and a painting line for axle assemblies), the plant is equipped with advanced machining units to process axle housings, final drives, and differentials.

2. Acquiring Spark Plug Division of Delphi of the U.S.A.
In October 2007, Zhuzhou Torch Spark Plug Co., Ltd. took over the Spark Plug Division of Delphi of the U.S.A., acquiring 15 production lines. The aim of the acquisition is not only to increase the company's annual spark plug production capacity from the current 90 million units to 230 million units but also to enable Torch to gain Delphi's highly advanced technology so as to raise the level of its own technological capabilities.

3. Establishing new production facility at Zhuzhou Gear Co., Ltd.
In October 2007, the passenger vehicle transmission system division of Zhuzhou Gear Co., Ltd. launched a new plant construction project in the Hexi Hi-Tech Development Zone. The first phase will be the construction of a new plant on 200,000 square meters of land.

Capital investment projects relying on the Group's own resources (automotive business only)

Project Budgeted amount for 2008 (in million yuan)
Revamping facilities and installing additional equipment at the casting center 150.00
Improving equipment to produce steering products at Shaanxi Fast Gear Co., Ltd. 250.00

Capital expansion plans to improve plants and equipment
In November 2007, Weichai Power Co., Ltd. decided to issue a maximum of 60 million A-class shares to raise up to 5,580 million yuan. The company intends to use the capital raised through issuing the shares in the following projects: 
  Project Budgeted amount
1. Setting up production lines and related facilities to manufacture the Landking diesel engines 2 billion yuan
2. Installing additional equipment to develop, test, and analyze engines and finished vehicles 1.5 billion yuan
3. Establishing an information platform and information center to streamline the Group's operations 500 million yuan
4. Launching a new heavy-duty commercial vehicle at Shanxi Heavy Automobile 690 million yuan
5. Releasing multi-gear, heavy-duty transmission systems at Shaanxi Fast Gear Co., Ltd.  510 million yuan
6. Revamping transmission technology at Zhuzhou Gear Co., Ltd. 380 million yuan