Geely, Yuchai form JVs to make diesel engines

China Yuchai International, a leading Chinese commercial diesel engine manufacturer, plans to start making diesel engines for passenger vehicles with Zhejiang Geely Holding Group.

Engine production is expected to begin in 2009 for an unnamed Geely vehicle intended for export.

Guangxi Yuchai Machinery Co., a subsidiary of China Yuchai, has formed two joint ventures with Geely. The joint ventures are based in Tiantai, Zhejiang province, and Jining, Shandong province.

Yuchai owns 52 percent of both joint ventures, Geely owns 30 percent and the remaining 18 percent is owned by Zhejiang Yinlun Machinery Co.

The joint ventures will produce a 2.0-liter diesel. The engine is expected to pass strict Euro 5 emission regulations.

However, in the China's latest Energy Conditions and Policies report issued by the National Development and Reform Commission in December 2007, the policy encouraging the production of diesel engines in the automotive sector was dropped from the list.

The government's main concern is that if the auto industry consumes too much diesel fuel, it will harm agriculture, says John Zeng, senior market analyst, Asian Automotive Research, Global Insight Inc.  

"In my view, it (the change in government policy) is a negative signal for companies who want to build diesel engine passenger cars for the domestic market."

But, "Geely has declared that its diesel passenger car will target the overseas market," adds Zeng.

The two joint ventures will each begin with an initial production capacity of 50,000 units annually, making a total of 100,000 units annually. Capacity is expected to be ramped up to 300,000 engines annually with each plant producing 150,000 units.

Production will begin in 2009, says a source at Guangxi Yuchai who declined to be named. The source says only a few thousand engines will be made in the initial year.

Engineers at Guangxi Yuchai say development of the 2.0-liter diesel engine has been completed. The engine is currently undergoing road tests.

The joint ventures will also produce 1.8-liter and 1.6-liter diesel engines. Common rail systems are sourced from Bosch China.

Geely sold 217,089 cars in China and exported 29,063 cars in 2007, according to Automotive Resources Asia.

Guangxi Yuchai's operations cover 1.7 million square meters in Yulin, Guangxi province. The factory makes diesel engines for light, medium and heavy trucks with an annual capacity over 500,000 units.

Zhejiang Yinlun makes aluminum and steel products used in automotive and truck heating, ventilation and cooling. Zhejiang Yinlun is based in the Hi-tech Industrial Development Zone, Tiantai County, Zhejiang province.

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