Weichai Power: Dominating the diesel power engine market
Embedded within China’s economic miracle is the arguably equally astonishing story of Weichai Power – an organization that has risen from conducting maintenance on steam boats in the 1940’s, to powering industry across the world today.
While in more recent times we’ve seen the proliferation of globally recognised technology and internet giants dominate discussion about China’s modern economy, Weichai Power’s evolution to its present-day market dominance, innovation and growth is ostensibly synchronous with the evolution of China’s economy over the past seven decades.
What does Weichai Power do?
Weichai Power is China’s largest manufacturer of commercial vehicle engines. Its enormous diesel engine and powertrain manufacturing and sales operation continues to expand today. However, it has also diversified into the manufacturing and sales of trucks, various heavy-duty auto components, forklifts, warehouse machinery, new energy powertrain systems and supply chain solutions.
The company is a publicly-listed on both the Honk Kong Stock Exchange (HKG: 2338) and the Shenzhen Stock Exchange (SHE: 000338).
It has a market cap of around US$150 billion and employs over 80,000 people across it various business units and subsidiary companies around the world.
Weichai Power profit
In the 2022 calendar year, Weichai Power recorded an annual net profit of US$674 million, and revenue of US$24 billion. This was considerably lower than 2021, when the company posted a net profit of US$1.4 billion, and revenue of US$30.4 billion.
In its 2022 annual report, the company said it was impacted by supply shocks and unexpected factors such as geopolitical conflicts.
A grip on the global diesel power engine market
During 2022 Weichai Power controlled around 32% of the global diesel power engine market, according to analysis by Fitch Ratings, making it world’s largest manufacturer of heavy duty truck engines.
So while the name Weichai Power may not be a household name globally, there’s a high chance you’ve crossed paths with Weichai’s diesel, or gas, engine technology in some way during your lifetime.
In 2020, Weichai sold 981,000 engines to clients in more than 100 countries.
It manufactures over 100 different types of diesel engines and a smaller number of gas engines for the following vehicle and machinery categories:
- Includes tractors, heavy, medium and light-sized trucks, heavy, medium and light-sized dump trucks, heavy, medium and light-sized special vehicles.
- Highway busses
- Engineering machinery
- Includes loaders, forklifts, cranes, bulldozers, graders, rollers, excavators, small multifunction machinery, sanitization machines, mechanical aerial work platforms.
- Agricultural equipment
- Includes silage machines, corn harvesters, wheat harvesters, peanut harvesters.
- Marine engines
- Electricity generators
- Industrial power generators
To support its global engine footprint, Weichai has established more than 6,400 service centers across the world, around 6000 of those are in China alone.
China’s diesel engine innovator
Weichai has a major ongoing research and development program which has seen the development of many world-first engine innovations.
It spends hundreds of millions each year on research and development, which importantly has allowed the company to keep up with evolving vehicle emissions requirements and maintain its dominant market share.
Weichai ooperates the following Research and development institutions in China:
- State Key Laboratory of Internal Combustion Engine Reliability
- National Commercial Vehicle Powertrain Assembly Engineering Technology Research Center
- National Commercial Vehicle and Construction Machinery New Energy Power System Industry Innovation Strategic Alliance
- National Specialized Crowd Innovation Space.
It has had a focus on engine light weighting and fuel efficiency.
In 2020, the Company launched the first commercial diesel engine in the world with thermal efficiency of 50%. The engine is said to save a single truck around US$235 in fuel costs per 10,000 kilometers.
Then in 2022, the company went a step further, releasing a diesel engine with a base thermal efficiency of 51.09%.
While Weichai’s core engine technology is based on diesel power, the company has more recently began manufacturing gas and hydrogen engines and has publicly committed to ongoing research into enhancing the reliability of natural gas and zero-emission diesel engines.
In January 2022, Weichai launched the the Sinotruk hydrogen-powered heavy-duty tractor trucks, which are powered by hydrogen fuel cell systems.
Weichai’s business units
Weichai is built on the foundations of its Power Systems business which includes the jewel in the company’s crown – engine manufacturing – along with the manufacturing of other powertrain components such as transmission, axel and hydraulic systems.
In addition to the aforementioned engine sales, in 2020, the Power Systems business also sold 1.86 million gear boxes, 1.09 million axles and recorded high-end hydraulic product sales of RMB500 million.
The key brands it sells Power Systems products under are Weichai Power Engine, Fast Gear, Hande Axle, and Linder Hydraulics.
The Commercial Vehicles segment controls subsidiary company, Shaanxi Heavy-Duty Motor Company Limited.
Headquartered in Xi’an, Shaanxi Province, Shaanxi designs and manufactures heavy-duty trucks and off-road vehicles which are sold under the SHACMAN brand in around 100 different countries.
Weichai reported the subsidiary sold a total of 181,00 heavy-duty trucks during 2020. It maintains a dominant market share in the Asia, Africa and Middle East markets for coal transportation, port tractors, sand and gravel transportation and crane trucks.
Along wth diesel trucks, Shaanxi has more recently began manufacturing full electric trucks.
In 2012, Weichai Power acquired a controlling stake in German forklift manufacturer, Kion Group AG. Kion is currently Europe’s largest manufacturer of Forklifts and heavy-duty warehouse equipment.
Through Kion, Weichai Power also controls Dematic – The largest supply chain solutions company in North America.
Kion Group and Dematic make Weicai Power a global top three company in warehouse and supply chain solutions.
In 2020, Weichai reported forkflift sales of 198,300 units and said Dematic’s intelligent logistics business contributed approximately RMB64,979 million to its sales revenue.
History of Weichai Power
The history of Weichai Power dates back to 1946 when the People’s Armed Forces of Weihai established a company called Jianguo Ironwork Cooperatives to manufacture rifles and repair steamboats.
Not long after in 1948, the cooperative began manufacturing low-speed diesel engines in 1948 and by 1953 was renamed Weifang Diesel Engine Works as the manufacturing and development of diesel engines became its major focus.
Over the next few decades the company would become the major supplier of engines for China’s fishing and military industries and began developing world-class engines for other applications. The overall demand for its products buoyed by the strong tailwinds of China’s economic transformation.
In 2002, the company was restructured with Weichai Holding Group Company incorporating subsidiary company, Weichai Power Company.
Weichai Power then listed on the Hong Kong Stock Exchange in 2004 as it embarked on global expansion. It also dual-listed A-Shares on the Shenzhen Stock Exchange in 2007 to provide easier access to shares for Chinese mainland residents.
It has now become one of China’s top diversified global conglomerates.
The ‘New Energy’ future
The Weichai Power business will undergo a major transformation in the next two decades. The company is currently conducting vigorous research and development on low carbon technologies including battery electric and hybrid power machinery and energy generation.
It has stated it expects its new energy business to lead the development of the company by 2030.
Ownership and key people
State-owned companies Weichai Holding Group Company and it’s parent Shandong Heavy Industry Group are Weichai Power’s majority shareholders. In total the two state-owned enterprises own 41.94% of Weichai Power.
Other major shareholders include institutional fund managers, Brandes Investment Partners, Lazard Asset Management, Barclays, Morgan Stanley, and Schroders.
Chairman and CEO
Weichai Power’s chairman and chief executive officer is Tan Xuguang.
Tan Xuguang has been a long-time employee of the company. He first joined in 1977 to work as an engineer in the Weifang Diesel Engine Factory when the company was operating as Weifang Diesel Engine Works.
He holds a doctor’s degree in engineering.
Tan Xuguang holds 58,842,596 Weichai Power A-Shares, which is around 0.67% of the company’s issued capital.