Weichai Power Co., Ltd. Business Report FY ended Dec. 2018

Financial Overview

(in million CNY)

	FY ended Dec. 31, 2018	FY ended Dec. 31, 2017	Rate of change	Factors
Sales	159,255.83	151,569.39	5.07%	-Affected by unfavorable factors such as the escalation of China-US trade friction, Brexit and trade protectionism, sales performance was lower than expected.
Operating profit	13,603.73	10,384.90	31.00%	-
Ordinary profit	13,858.28	10,522.27	31.70%
Net profits	11,625.73	9,178.37	26.66%

-In 2018, the company sold a total of 363,000 engines for heavy trucks, which was basically the same as the same period of last year. The market share reached 31.6% and continued to maintain its leading position in the industry.

-In 2018, Shaanxi Heavy Vehicle Co., Ltd., a subsidiary of the company, sold a total of 153,000 heavy trucks, a year-on-year increase of 2.7%, ranking first in the domestic heavy truck enterprises.

-In 2018, the company's controlling subsidiary, Shaanxi Fast Gear Co., Ltd. sold a total of 909,000 gearboxes, an increase of 8.9% year-on-year.

Recent Development

-On November 18, 2018, Weichai Maz project began its trial production stage at the “Great Stone” Industrial Park, and a groundbreaking ceremony was held on the spot. (From a press release on November 20, 2018)

Joint Venture

-In November 2018, the company and Ballard Hong Kong Limited jointly established Weichai Ballard Hydrogen Technology Co., Ltd. with a registered capital of CNY 1.1 billion. Among them, the company invested CNY 561 million, accounting for 51% of the registered capital, Ballard Hong Kong Limited invested CNY 539 million , accounting for 49% of the registered capital. (From a press release on November 26, 2018)

Acquisition

-On November 13, the Company acquired the 19.9% stake in Canada Ballard Power Systems Co., Ltd. through a wholly-owned subsidiary, Weichai Power (Hong Kong) International Development Co., Ltd. for USD 164 million, officially becoming the first of Ballard. Major shareholder. Ballard is a global leader in hydrogen fuel cells in Canada. It designs, develops, manufactures and markets proton exchange membrane fuel cell products for various applications and provides technical services. Through the acquisition, the two companies will establish a joint venture to jointly develop next-generation proton exchange membrane fuel cell stacks and modules. (From a press release on November 14, 2018)

Strategic partnership

-In December 2018, Weichai Power and FAW Jiefang signed a strategic cooperation agreement in Changchun, Jilin. (From a press release on December 26, 2018)

-On September 11, 2018, Weichai Group and Russia's KAMAZ Group signed a strategic cooperation framework agreement in Vladivostok. (From a press release on September 12, 2018)

-In May 2018, Weichai Power and Solid Oxide Fuel Cell (SOFC) supplier Ceres Power signed a strategic cooperation agreement in Weifang, Shandong. (From a press release on May 16, 2018)

-In April 2018, Weichai Power and Yutong Bus signed a strategic cooperation agreement to open a new round of in-depth cooperation between the two parties, pushing both sides to take the lead in the global energy bus field. (From a press release on April 19, 2018)

-In March 2018, Weichai Power and Xugong Group signed a comprehensive strategic cooperation framework agreement in Weifang, Shandong. (From a press release on March 26, 2018)

Outlook for FY ending December 2019

-Sales for 2019 is expected to be CNY 175 billion increased by 10% on YoY basis (From the Company's annual report 2018).

R&D Expenditure

	FY ended Dec. 31, 2018 (million CNY)	FY ended Dec. 31, 2017 (million CNY)	FY ended Dec. 31, 2016 (million CNY)
R&D Expenditure	6,493.62	5,646.57	3,559.67
Ratio of R&D expenses to operating income	4.08	3.73	3.81%

R&D structure

-In 2018, the Company had 6,780 R&D staffs.

R&D Facilities

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

-On June 20, Weichai (Tokyo) Science and Technology Innovation Center was established. (From a press release on June 20, 2018)

Capital investment projects for FY2018

(in million CNY)

Project	Budget	investment in 2018	Progress
Hande III	723.88	264.70	99.77%
Transmission drive	186.23	107.00	58.12%

Investment

-On March 29, 2018, a subsidiary of the Company, Hande Axle (Zhuzhou) Gear Co., Ltd., held a groundbreaking ceremony for a new drivetrain component plant. The new plant will be built on a site of 266,670 square meters in the Jinshan Science and Technology Industrial Park, Hetang District, Zhuzhou City. The company anticipates the investment in the project will reach Chinese yuan (CNY) 260 million. The plant is going to produce axle gears, drive axles, gears for electric parts, and other drivetrain components. When the construction completes, the company is expected to generate sales of over CNY 3 billion. (From a press release on March 30, 2018)

-On March 5, 2018, Yangzhou Economic Development Zone held a ceremony to commemorate the new agreements, the launch and the completion of several significant projects. The Company’s WP3 engine plant requires an investment of CNY 460 million in total. The new plant is going to produce 100,000 engines that meet China V and higher emission standards. It expects to generate sales of CNY 4 billion and profit of CNY 150 million. (From some releases on March 6, 2018)

-On February 5, 2018, the company signed an alliance framework agreement with the government of Weifang, on the potential investment of CNY 50 billion in the construction of a new industrial park for the new energy vehicle power industry. The city hopes to accelerate the formation of a new energy vehicle industry group of worth CNY 100 billion in total based on this industrial park. (From some releases on February 6, 2018)