From modest beginnings, Weichai Power becomes a diversified conglomerate

Weichai Power, headquartered in Weifang, East China's Shandong province, has transformed itself from a small regional State-owned diesel combustion engine producer into a diversified global conglomerate with a strong presence in fields such as heavy-duty trucks, transmissions, forklifts, hydraulic parts and automatic logistics systems, after being listed on the Hong Kong Stock Exchange for 15 years.

The company brought in 159.26 billion yuan ($23.79 billion) in sales revenue last year, up 5.1 percent year-on-year. The sales revenue increased 26 times that of 2004. And it has established a sales network covering more than 110 countries and regions, according to the company.

Founded in 2002 by the main sponsor, Weichai Holding Group, Weichai Power was listed on the Hong Kong Stock Exchange on March 11, 2004. The listing marked a major milestone in Weichai Power's global expansion, according to the company.

Tan Xuguang, chairman of Weichai Power, said the initial public offering in Hong Kong - often the forefront of Chinese companies expanding overseas and foreign companies entering the Chinese market at that time - allowed Weichai Power to better exploit its advantage and hastened its international progress.

Weichai Power made its first acquisition by purchasing Torch Automobile Group in Hunan province in 2005. Weichai obtained a controlling stake in Shaanxi Fast Gear, Shaanxi Heavy-duty Motor Company and Hande Axle through this deal. The company then developed an industrial chain that combined the development of engines, transmissions and axles under one roof.

Weichai Power's pace of global expansion pace has significantly increased since 2009, when the global financial crisis broke out in 2008, putting many leading manufacturing businesses under pressure.

In 2009, Weichai Power acquired French marine engine developer and producer Moteurs Baudouin. The deal allowed Weichai Power to fill its technological gap and speed up exploration in European and American markets. It also allowed Moteurs Baudouin to use Weichai Power's sales network to boost its presence in Asia.

In 2012, Weichai Power bought a 25 percent stake in German forklift maker Kion for 467 million euros ($528.21 million) and a 70 percent controlling stake in Kion's subsidiary Linde Hydraulics, for 271 million euros. The deal broke foreign companies' monopoly on the Chinese market and created opportunities for Weichai Power to tap into the high-end manufacturing of engineering and agricultural machinery.

Supported by Weichai Power, Kion acquired the United States-based Dematic, an automation and supply chain optimization company, in 2016. The deal allowed Weichai Power to develop a smart logistics industrial chain and further optimize its business structure.

Also in 2012, Weichai purchased a majority stake in Italian yacht maker Ferretti, tapping into the luxury yacht sector.

In March 2017, Weichai America, a wholly owned subsidiary of Weichai Power, invested in leading alternative-fuel power system developer Power Solutions International. The deal marked Weichai Power's debut in the North American power market.

"Weichai Power's overseas acquisitions did not aim to make financial figures look beautiful. The real target for the company is to fill out the technological gap and optimize the company's business structure," Tan said.

Weichai Power said all its overseas acquisition projects reported profits.

Kion reported nearly 8 billion euros in sales last year, an increase of 5.2 percent year-on-year. Its net profits reached 401.6 million euros.

Annual sales volume of Moteurs Baudouin rose 20-fold after joining the Weichai Power family. The figure further increased 60 percent year-on-year to a record high in 2018, according to Weichai Power. The company, a marine engine supplier, has expanded into the fields of industrial power and high-end mining trucks.

Apart from Western countries, Weichai Power also launched operation in countries such as India and Belarus. Weichai Power and Belarus' MAZ launched a joint venture in the China-Belarus Industrial Park to produce engines last year. The project is an important cooperation in the machinery manufacturing sector under the BRI framework, according to the company.

MAZ is one of the largest commercial vehicle producers in Belarus. However, its development was constrained because the company lacked engine development capability and capacity.

"Under this cooperation, engines produced in the new factory will be equipped on most of MAZ's automobiles and improve its competitiveness," said Hu Haihua, general manager of the joint venture.

Hu also said the engines produced in Belarus can also be sold to countries such as Poland, Ukraine and other countries in Europe and Asia, which helps the company to further expand global expansion.

In addition, Weichai has set up innovation centers in Tokyo, Silicon Valley and Chicago in the US and Aachen in Germany to strengthen its research and development. Weichai has invested more than 15 billion yuan over the past 10 years on innovation.

Moreover, Weichai Power has identified new energy as a major high-growth sector and paid close attention to strengthening its position in this area. In 2016, the company purchased a 34 percent stake in the domestic leading fuel cell maker Foresight Energy, marking its debut in the sector.

In November 2017, Weichai Power signed a strategic framework agreement with Germany's industrial giant Bosch to jointly develop hydrogen fuel cells and parts.

The company also partnered with Westport Fuel Systems from Canada in August last year to promote high pressure direct injection technology development in China. In the same year, it became the largest shareholder of Ballard Power Systems, a Canadian company specializing in hydrogen fuel cell development, after purchasing a 19.9 percent share with a total investment of $164 million.

Currently, Weichai Power and Ballard Power have established a joint venture with a registration capital of 1.1 billion yuan. Weichai Power has a controlling interest of 51 percent in the joint venture. The company has set a goal to be a leading engine supplier, commercial vehicle producer, smart logistics system developer and new energy supplier.