China Yuchai International Enters into Joint Venture with Geely and Yinlun
China Yuchai International Limited, the leading manufacturer and distributor of diesel engines in China, announced today that its subsidiary, Guangxi Yuchai Machinery Company Limited, has entered into an Equity Joint Venture Agreement with Zhejiang Geely Holding Group Co., Ltd. and Zhejiang Yinlun Machinery Co, Limited, to form two joint venture companies in Tiantai, Zhejiang Province and Jining, Shandong Province.
The joint venture companies JV Cos 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 JV Cos 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 JV Cos provided the conditions of quality, price and production capacity are met. The JV Cos 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 JV Cos 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 JV Cos and is responsible for the establishment of the JV Cos, construction of production facilities and provision of engine parts to the JV Cos. Geely and Yinlun with a 30 percent and 18 percent shareholding respectively in both JV Cos, 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 8th 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% year-over-year growth.