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5. Weichai Power Co., Ltd. Business Report FY ended Dec. 2015

Weichai Power Co., Ltd. Business Report FY ended Dec. 2015

-In 2015, the Company sold 118 thousand units of engines for heavy duty truck, decreasing by 56.5% on a year-over-year basis. The Company sold 20.3 thousand units of engines for bus, decreasing by 10.2% on a year-over-year basis, with 12.5% of the market share in the mid and large-size bus market.

-In 2015, Shaanxi Fast Gear Co., Ltd., the subsidiary of the Company sold 407 thousand units of transmissions, decreasing by 34.4%.

Recent Development of Subsidiary

-Shaanxi Fast Gear Co., Ltd., a subsidiary of Shaanxi Fast Auto Drive Group Company, announced that it has completed a production line to assemble its S-series transmissions. The new line uses advanced technologies to enable on-line assembly of bearings and shafts, enabling the mass production of the S-series. (From a press release on January 4, 2016)

-The Company announced that Weichai Power Yangzhou Diesel Engine Co., Ltd, its subsidiary located in the Yangzhou Development Zone, will establish a new plant to produce high-end, lightweight engines that meet the China V and China VI emissions standards. In its Yangtze River Delta strategy, the company aims to expand the Yangzhou facility, expecting to make it a major development and production base for engines and vehicles. Sales at the subsidiary are expected to reach CNY 10 billion by the end of 2018. (From a press release on December 3, 2015)

-Weichai Power Co., Ltd. announced that Linde Hydraulics China began production operations in Weifang. The new plant manufactures components such as high-pressure hydraulic pumps, motors, and valves. Linde Hydraulics China was established jointly by Weichai Power and Linde Hydraulics (KG), Weichai Power's German subsidiary, in December 2014. The new plant has been expanding its customer base and increasing its production volumes since it began its operations several months ago. The joint venture is expected to produce over 6,000 sets of hydraulic components such as pumps per year for its customers, including major OEMs in China.

New Company

-In February 2015, Shaanxi Fast Gear Co., Ltd., the subsidiary of the Company, established a new joint venture by offering 51% of the overall investment with Eaton, named as Fast Eaton (Xi'an) Drive Systems Co., Ltd. The new company will produce clutches.

Acquisition

-The Company announced that Weichai Power (Luxembourg) Holding S.a.r.l., its wholly owned subsidiary, would acquire 4.95 percent of KION Holding 1 GmbH shares from Superlift Holding S.a r.l. for EUR 186.9 million. When the transaction is completed, Weichai Power will indirectly own 38.25 percent of KION shares. (From an announcement by the Company on March 30, 2015)

Share Transfer

-In April 2015, the Company sold the 100% stake it held in Zhuzhou Torch Auto Lamp Co., Ltd.

Awards

-Shandong Binzhou Bohai Piston Co., Ltd. announced that it received seven awards from the Weichai Group in 2015. These awards included the Excellent Supplier Award, the Best Quality Award, the Simultaneous Development Award, and the Excellent R&D Partner Award. (From a press release on December 22, 2015)

-Zhuzhou Torch Spark Plug Co., Ltd., a subsidiary of the Company, announced that it has received the Supplier Quality Excellence Award from Fuji Heavy Industries Ltd. (FHI). Zhuzhou Torch Spark Plug has been supplying spark plugs to FHI since 2010. (From a press release on April 23, 2015)

Business Plan for Next Year

-In 2016, the Company plans to reach CNY 81.6 billion sales, 10.7 percent increase than previous year. (From the Company's 2015 annual report)

R&D Expenditure

R&D structure

-In 2015, the Company had 4,688 staffs.

R&D Facilities

-The Company has R&D centers in China and Austria.

-In February 2016, the Weichai Power Group opened a government certified test center for internal combustion engines. CNY 550 million was invested in this facility that performs R&D and reliability testing/projection for internal combustion engines and their major components. The center is expected to contribute to improving product life, enhancing quality, and reducing the failure rates of internal combustion engines made in China. (From a press release on February 4, 2016)

Product Development

-In 2015, the Company had the following key R&D projects:

• Key technology research and industrializaion for 7L low emission diesel engines
• L project diesel engine development
• X3000 series products
• 16JSX300A series transmissions
• Small MPV project （M301 capitalization）

New Products

-In April 2015, the Company announced its four new light diesel engines that meet the China V emissions standards: WP2.1; RA425; WP3; and WP4.1. These common rail diesel engines use a selective catalyst reduction (SCR) system. The company plans to supply these engines for a variety of vehicles including mini commercial vehicles, mini buses, pickup trucks, and small construction machines. (From a press release on April 23, 2015)

-The Company has announced its WE61 hybrid powertrain system. The new powertrain, which uses a two-motor series-parallel hybrid system, is suitable for city buses. The system consists of a WP7 engine, a 90kW integrated starter generator, and 105kW drive motors. A 12-meter test bus powered by the WE61 system could speed up from 0 to 50 km/h in less than 22 seconds. It consumed less than 21 liters of fuel per 100 km. (From a press release on February 4, 2015)

-The Company announced three new engines, namely the WP2.1, WP3, and WP4.1 engines, for light-duty trucks on January 19, 2015. The WP2.1 engine for mini- and small-trucks features low speed, low-fuel consumption, low emissions, and low noise. The WP3 engine is designed to offer excellent driving performance and superior riding comfort for China-made high-end mini commercial trucks with a wheelbase of 3.3 meters. The WP4.1 engine is an advanced version of a 97kW China IV engine with a maximum torque of 400N.m. The new engine delivers 115kW and produces maximum torque of 520N.m. It is suitable for light- and medium-duty trucks and dump trucks. (From a press release on January 21, 2015)

-The Company announced the fourth generation of its Landking engines, including the WP12NG flagship engine and the WP10 4-valve diesel engine. The WP12NG engine, based on the Landking WP12 diesel engine, uses new cylinder heads, pistons, and valves that can support natural gas fuel. The engine's new electronic control system improves the vehicle's driving performances and fuel economy, while reducing failure rates and offering easy maintenance. The WP10 4-valve diesel engine is an upgraded version of the Landking WP10 diesel engine. It features 4-valve cylinder heads, newly developed intake and exhaust systems, and a newly designed front-end accessory drive. As it shares many components with the Landking WP10 diesel engine, it provides easy maintenance. (From a press release on January 20, 2015)

-The Company announced its WP13 engine, a new 13-liter engine for heavy-duty commercial vehicles. The WP13 was developed based on 12-liter WP12 diesel engines. The WP13 engine delivers 480hp-550hp and offers a maximum torque of 2,500N.m. Its performances compare with top-class internal combustion engines made by global manufacturers. The engine achieves rotational speed of up to 1,000 r.p.m. and offers powerful driving performances especially on uphill slopes. (From a press release on January 8, 2015)

-In 2015, the planned investment in the new projects reached CNY 40.8 trillion, increasing 5.5%.