China Yuchai International Limited and its subsidiary Guangxi Yuchai Machinery Company Limited have entered the Chinese passenger vehicle market through an equity joint venture agreement with Zhejiang Geely Holding Group Co., Ltd and Zhejiang Yinlun Machinery Co., Limited. These agreements will result in the formation of two joint venture companies in Tiantai, Zhejiang Province and Jining, Shandong Province.

 

The joint venture companies will be primarily engaged in the development, production and sales of a proprietary diesel engine and its parts for passenger vehicles. The main product is a 4D2.0L diesel engine and the technology for this new diesel engine will be purchased by the joint venture companies from Geely subject to certain specified design technology standards being met. Geely will develop the first generation prototype of the diesel engine and will purchase all its requirements from the joint venture companies provided the conditions of quality, price and production capacity are met. The joint venture companies will be responsible to continue the development of this technology and diesel engine to commercial fruition including Euro-5 certification to meet China's evolving emission standards. The total design production capacity of both joint venture companies will be 300,000 diesel units, with each joint venture company starting with a capacity for 50,000 diesel engine units and then adding capacity to reach 150,000 units annually.

 

Yuchai will be the controlling shareholder with 52 percent in both joint venture companies and is responsible for the establishment of the joint venture companies, construction of production facilities and provision of engine parts to the joint venture companies. Geely and Yinlun with a 30 percent and 18 percent shareholding respectively in both joint venture companies, are responsible for procuring all basic supplies and local government support for the projects.

 

In the first 11 months of 2007, Geely was ranked as the eighth largest automaker in China with nearly 200,000 cars sold. During this period, total number of passenger vehicles powered by 1.6L to 2.0L engine sold in the entire China market reached approximately 1.4 million units, reflecting a robust 58 percent year-over-year growth.

From: search-auto parts/industry news