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“Through the next step in the integration of the Hunan Torch (000549.SZ), our goal is to become China's largest and most influential powertrain supplier.†On November 24, Weifang’s office sat in Weichai Power. (2338.HK) Chairman Tan Xuguang revealed his heart for the first time.
Two weeks ago on November 8, Weichai Power's acquisition of the Hunan Torch had just completed the transfer of assets.
On the same day, the Hunan Torch held the board of directors, Tan Xuguang and other four-person teams from Weichai were elected as new directors and began to take over the listed company originally controlled by the Delong Department.
The industry generally believes that the acquisition of the Hunan Torch, Weichai Power has opened a horizontal integration of the industrial chain and become a prelude to a complete supplier of power solutions.
Horizontal integration
After winning the torch in Hunan, Tan Xuguang believes that the next reorganization is of great significance and can achieve multi-win-win situation.
Take the example of the Shaanxi Fast Gear (hereinafter referred to as Shaanxi Dental) under the Hunan Torch Co., Ltd., which is a supplier of key components in the heavy-duty automotive field, and Weichai Power's service organizations are the most important compared with similar domestic companies. Perfect and densest (having 78 overseas offices and more than 1,000 special maintenance service centers). From this perspective, the two sides complement each other in the heavy truck market, and Weichai Power's reorganization of the Hunan Torch will help Shanfang and Weichai Power to pull each other's market advantage to achieve strategic cooperation.
From another perspective, Weichai Power and its subsidiaries produce about 300,000 diesel engines each year. The gears for diesel engine production are basically purchased from other manufacturers. If Shanbei cooperates with Weichai Power, it can provide gear for Weichai Power's diesel production, which will be a huge market. The existing operations of the Hunan Torch can also produce similar results.
According to Tan Xuguang’s judgment, price is the focus of competition in the future Chinese internal combustion engine market. Once foreign companies enter the Chinese market, the localization process with falling prices is the moment to test Chinese local companies.
And the fact that it is targeting the Chinese market has already taken place. Last year, Sweden's Volvo, Sinotruk and China FAW invested RMB 2 billion in Jinan to jointly build a world-class engine production base. After being horizontally integrated with those of China Torch's "China's Best Heavy Truck Power Transmission Component Assets," Tan Xuguang's domestic engines will greatly increase his ability to compete against foreign giants.
Tan Xuguang believes that Weichai Power, as the first domestic diesel engine manufacturer listed on the Main Board of Hong Kong, has won the attention of many international industrial funds and technology groups in recent years for its steady and rapid development, such as GE Capital in the United States and Germany. Dresdner Allianz Industrial Fund is the company's H-share shareholders. For a long time, Weichai Power has maintained good communication and exchange with them. Through their Weichai power, they can effectively integrate the technical resources of Europe and the United States and other regions; and the Hunan Torch and its subsidiaries also have cooperative relations with internationally renowned large companies. In this way, it can provide support for future follow-up technologies of the Hunan Torch and Weichai Power, thereby enhancing the company's competitiveness and profitability.
Tan Xuguang’s next step strategy for Weichai and Xiangxi Torch is to quickly integrate the Hunan Torch's auto parts and mechanical parts products with the resources of its shareholders, Weichai Power, in order to compare the company's procurement, production, and sales in the industrial chain system. In the short period of time, it will effectively maximize the synergy effect and strengthen and expand the national brand of Chinese auto parts and components.
Although it takes time for the realization of the ideal, there is one thing that can be asserted. In this turn of the Hunan Torch Switcher, Weichai has cleared the obstacles of industrial integration and consolidated the first domestic brand of diesel engines. Hegemonic status.
The capital market is optimistic about Weichai's integration of Hunan Torch. On November 25, the same day that the Hunan Torch announced that the board of directors had changed classes, the share price of Weichai Power soared 3.54% to close at 16.10 yuan. The international investment bank also became clearer because of the acquisition of Hunan Torch, and it ranked first on the front line of Weichai Power. After entering November, it successively increased its holdings twice and purchased 2.7 million new shares at a total cost of 39.93 million Hong Kong dollars.
Reinforce power chain
In March 2004, after the domestic A shares of Weichai Power went public, it began tracking the torch. Wei Li, Secretary of Weichai Power's Board of Directors, explained that “Weichai noted its better asset status.â€
The Hunan Torch Group's business includes Shaanxi Auto, Shaanxi Dental and automotive air-conditioning companies Fujitsu, Dongfeng Hummer off-road vehicles and Shanxi Xinhuanggong Construction Machinery. Most of these businesses are highly relevant and closely related to the main business of Weichai.
“Weichai took a shot and saw the industrial background and related business of the Torch Torch, especially the synergistic effect of gears and other auto parts business and Weichai Power.†Tan Xuguang analyzed this.
Weichai Power is the world's largest single-brand 10L engine manufacturing base, and is the largest high-speed high-power diesel engine manufacturer in China, occupying 80% and 78% of the market share of powertrains such as heavy-duty vehicles and construction machinery. Shandon currently has a market share of more than 90% in the domestic heavy-duty vehicle market of over 15 tons, and it has become the world's first single-plant annual output.
In addition, the engine of Weichai is the power output component, and the gearbox of Shaanxi Gear is the power transmission component. Now, Weichai Power's products have a wide range of power, which can almost meet the requirements of different torque gearboxes produced by Shaanxi Gear. Both products have strong complementarity both in production and in the sales of certain products. Reorganization can greatly reduce the production and sales costs of both products and increase the bargaining power of the products in the market.
According to Tan’s assumption, the goal of Weichai Power is to become a complete supplier of power solutions. By 2008, it will achieve a sales revenue of over 50 billion yuan, and it will acquire “one of the best quality vehicle and parts manufacturing companies in Chinaâ€. After the Torch, this goal is clearly visible.
According to Weichai's plan, by the end of the “Eleventh Five-Year Plan†period, the Hunan Torch will have the following capacity: 50,000 heavy trucks, 450,000 gearboxes, 120,000 axles, 3000 off-road vehicles, and 200 million spark plugs.
View related topics: Assembling: Auto Parts Giants Hunan Torch