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5. Zhongshan Broad-ocean Motor Co., Ltd. Business Report FY ended Dec. 2017

Zhongshan Broad-ocean Motor Co., Ltd. Business Report FY ended Dec. 2017

New Company

-On January 30, 2018, Zhongshan Broad-ocean Motor Co., Ltd. announced a plan to set up a new automotive business group by consolidating its four subsidiaries, Shanghai Edrive Co., Ltd., Beijing Prestolite Electric Co., Ltd., Wuhu Generator Automotive Electrical Systems Co., Ltd. and Broad-Ocean EV Motor New Energy Co., Ltd., and also their subsidiaries. It also said that Shanghai Edrive Co., Ltd. has reached an agreement with Dongfeng Industrial Co., Ltd. on the establishment of a new joint venture tentatively named Dongyang Edrive Systems Co., Ltd. The registered capital of the new joint venture will be Chinese yuan (CNY) 50 million. Shanghai Edrive is going to have a stake of 60% in the new company by investing CNY 30 million. The new company plans to build a production site in two phases in five years with an investment of CNY 1 billion. In three years, starting in 2019, it will establish a capacity to produce the following products: 50,000 sets of electric drive units for commercial vehicles (motors, controllers and decelerator or transmission); 100,000 sets of electric drive units for passenger vehicles (motors, controllers and decelerator or transmission); 100,000 sets of electric drive units for new energy vehicles (VCU: Vehicle Control Unit), high-voltage electricity distribution system and DC-DC converters; and 8,000 sets of hydrogen fuel cells. (From a corporate announcement on January 30, 2018)

-On July 27, 2017, Zhongshan Broad-ocean Motor Co., Ltd. signed a contract with Zhongtong Bus Holding Co., Ltd. and the Management Committee of Liaocheng Economic Development Zone regarding the establishment of a new joint company, Tongyang Fuel Cell Technology (Shandong) Co., Ltd. The new joint company will be built in the Liaocheng Economic Development Zone. The total investment is Chinese yuan (CNY) 500 million, owned 88% or CNY 440 million by Zhongshan Broad-ocean Motor, 10% or CNY 50 million by Zhongtong Bus Holding, and 2% or CNY 10 million by an investment company named by the Management Committee of Liaocheng Economic Development Zone. It produces and develops hydrogen fuel cell system and hydrogen fuel power train, and offers new energy vehicle management platform. When established, it's expected to generate sales of CNY 10 billion a year. There will be two construction phases, and the first phase will cost CNY 1 billion. (From a corporate announcement on July 27, 2017)

-On February 17, 2017, Zhongshan Broad-ocean Motor Co., Ltd. signed a framework licensing agreement on fuel cell module technology with a Canadian fuel cell battery technology supplier, Ballard Power Systems, Inc. Zhongshan Broad-ocean Motor intends to set up, directly or indirectly, a subsidiary, build an assembly line for licensed battery modules in Zhongshan and expand the business in licensed areas. Ballard Power Systems is going to support Zhongshan Broad-ocean Motor and its subsidiaries technically to ensure their assembly lines operate at full capacity. It also allows Zhongshan Broad-ocean Motor to use all intellectual properties of Ballard Power Systems regarding assembly, sales, and service on battery modules for commercial vehicles. (From a corporate announcement on February 17, 2017)

Order

-The subsidiary of CNR successfully entered the supporting system of GAC and SAICMAXUS and realized the mass production of Geely's third-generation flat wire generators. (From the 2017 Company Annual Report)

Awards

-In 2017, CNR won the Chery’s “2017 Excellent Quality Performance Award”. (From the 2017 Company Annual Report)

Business Plan for 2018

-It is estimated that the Company’s operating revenue in 2018 will maintain stable growth with a plan of 10.585 billion Yuan, a 23% year-on-year increase; the estimated operating cost will be 8.286 billion Yuan with 20.78% year-on-year growth; and the planned net profit will be 651 million Yuan with 45.45% year-on-year growth.

-By 2024, it is estimated that the Company will achieve the annual revenue of 18 billion Yuan, of which each of three aspects, the home and household appliances, the vehicle rotating electrical appliances and the powertrain systems for new energy vehicles, will account for 6 billion Yuan.

R&D Facility

-The company set up R&D teams in Zhongshan, Beijing, America, Wuhu, Shanghai, Wuhan, and Shenzhen, specializing in the research of powertrain systems, intelligent efficient motors, and automotive rotating equipment for NEVs.

-Beijing Prestolite was authorized as one of the enterprise technology centers by the Beijing Municipal government.

-Shanghai Edrive, as president of the National Industry Technology Innovation Strategic Alliance of Electric Drive System of Vehicle, and the supporting institution of Shanghai Automobile Electric Drive Engineering Technology Research Center, successively untertook and participated in more than 30 Ministry of Science and Technology's 863 EV Major Projects, and managed more than 10 national and professional standards.

-The Company has three national laboratories, three provincial-level Enterprise Technology Center and two provincial-level Factory Technology Research Center, and has established Postdoctoral Centre and Academician and Expert Workstation.

Patents

-As of Dec. 31, 2016, the companies had applied for 2,288 patents, including 1,513 authorized patents and 1,530 valid patents.

R&D Cooperation

-On January 17, 2018, Zhongshan Broad-ocean Motor Co., Ltd. announced a plan to invest EUR 6.5 million in Hydrogenious Technologies GmbH, a world-leading liquid organic hydrogen carrier technology supplier. The investment will allow Zhongshan Broad-ocean Motor to have a 10.20% stake in Hydrogenious Technologies by converting all the corporate bonds it owns to the shares in the technology supplier. (From a corporate announcement on January 18, 2018)