Overseas expansion reaps rewards for Weichai Group

Weichai Group, a major manufacturer of engines for heavy-duty trucks and construction machinery in China, hopes overseas investment will support its growth in coming years.

Oversupply has become a major problem for many Chinese heavy-duty truck manufacturers, and the company is looking to overcome the challenge by expanding overseas.

"The most urgent challenge facing China's heavy-duty truck makers is oversupply," said Tan Xuguang, chairman and chief executive officer of Weichai.

In late June, Weichai's German branch company Kion announced plans to acquire US logistics company Dematic for $2.1 billion, the latest move in Weichai's global strategy.

Tan said the acquisition will help Weichai reduce dependence on domestic government investment projects and promote overseas expansion to relocate its capacity.

"A global network that covers Europe, America, Asia and Africa will be established after we acquire Dematic," said Tan. "We are confident this can help solve the oversupply problem."

Weichai has made huge inroads into the global market since 2009.

In 2009, Weichai acquired Moteurs Baudouin SA in France. It acquired a 25 percent stake in the world's second-largest forklift maker Kion Group, based in Germany, for 467 million euros ($522 million) and a 70 percent controlling stake in Kion's subsidiary Linde Hydraulics for 271 million euros in 2012.

"We are expanding in both directions along the industrial chain," Tan said. "Synergy is always a factor that must be considered before we make any purchase."

Tan said Weichai acquired its stake in Kion because Weichai can partner with the latter to support its engine business. Dematic will supplement Kion with its leading software and logistic services.

The investment in Kion is proving to have been a good decision. According to Weichai, overseas income accounted for 57 percent of the group's 100 billion yuan ($15 billion) total revenue in 2015, with the majority of overseas income from Kion.

However, not every investment has been so profitable. Weichai purchased a majority stake in Italian yacht maker Ferretti in 2012, but it has only started returning a profit this year.

Xu Hong, Party chief of Weichai, said even though some of its overseas investments have not developed as expected, Weichai had to seek new areas of business.

Its strategy seems to be working as Weichai's sales revenue increased 7.1 percent year-on-year to 21.8 billion yuan in the first quarter of this year. The net profit of the company is 760 million yuan, a 50 percent year-on-year increase.

zhuanti@chinadaily.com.cn

(China Daily 09/05/2016 page38)