Xuchang Yuandong Drive Shaft Co., Ltd. Business Report FY ended Dec. 2022

Financial overview

(CNY millions)

	FY ended Dec. 31, 2021	FY ended Dec. 31, 2021	Rate of change (%)	Factors
Sales	1,074.29	2,005.71	(7.37)	-Decreased sales and profitability due to decreased demand in the heavy-duty truck market and rising raw material costs.
Operating income	73.72	269.49	(28.74)
Ordinary income	75.78	267.17	(27.94)
Net income	72.82	234.93	(27.59)

Investment

‐The company announced that it plans to increase a CNY 50 million investment in Henan Sanjia Automotive Parts Co., Ltd. (Henan Sanjia) to acquire 60.98% of the company’s equity, and sign capital increase agreements with the company and other shareholders. The two parties will jointly develop auto parts such as universal joints and center bearings. After the capital increase, the registered capital of Henan Sanjia will be changed from CNY 32 million to 82 million, and Yuandong Drive will become the controlling shareholder of the company. (From a Yuandong Drive SZSE announcement dated December 14, 2022)

Research and development activities

Projects	Progress	Note
GAZ drive shaft development	State of development	For low temperature regions outside of China
Development of lightweight high-end drive shafts	State of development	Purpose of development
Development and application of key technologies used on fork structures and earhole machining process for light and medium transmission shafts	Completed type testing and small-scale prototyping	For mass production
Development and application of wear and life of transmission shaft keyway couples	Completed type testing and small-scale prototyping	To improve quality
Development and application of coaxial alignment of transmission shaft intermediate keyway couples	Completed type testing and small-scale prototyping	To improve quality
Development and application of major technologies to reduce weight of standardized drive shaft parts	Completed type testing and small-scale prototyping	Support for carbon neutral and modular production
Research and commercialization of key technologies for light-weight materials and components for new-energy vehicles	State of development	Using new lightweight aluminum alloy materials, achieve carbon neutral targets, support of producing modules
Design and development of axle-to-axle shafts specifically for commercial vehicles	Completed type testing and small-scale prototyping	For specific customers
Design and development of advanced constant velocity transmission shafts	State of development	For specific customers
Design and development of maintenance-free dedicated power take-off shafts	Completed type testing and small-scale prototyping	For specific customers
Design and development of hollow spline shaft products	Completed type testing and small-scale prototyping	To improve quality , support module production
Optimization of automated manufacturing process to produce splined shaft forks	Completed type testing and small-scale prototyping	To improve quality
Design and development of air blowing equipment and process for pre-treating nylon coating	Completed type testing and small-scale prototyping	To improve quality

R&D structure

-The Company has a National Authorized Enterprise Technology Center, National Postdoctoral Research Station, Henan Province Drive Shaft Engineering Technology Research Center, Henan Province Laboratory of High Performance Lightweight Drive Shaft, and Henan Industrial Design Center.

R&D expenditure

(CNY millions)

Year	FY ended Dec. 31, 2022	FY ended Dec. 31, 2021	FY ended Dec. 31, 2020
R&D expenditure	59.59	103.06	108.97
Ratio of R&D expenses to sales	5.55	5.14	5.03%

-By the end of 2022, the Company had 218 R&D staff members, accounting for 10.43% of all employees.

Patents and Certifications

-As of the end of 2022, the company has 217 patents (29 invention patents, 4 exterior design patents, 180 utility model-type patents) and 4 software copyrights.

-The Company has received IATF16949:2016 quality management system certification, GB / T24001-2016 / ISO14001:2015 environmental management system certification, ISO5001:2018 energy management system certification, and ISO45001:2018 occupational health and safety management system certification.