DEUTZ, one of the world’s leading manufacturers of innovative drive systems, entered the joint venture agreement with SANY, China’s largest construction equipment manufacturer.
DEUTZ will be investing a mid double digit million euro amount in the new joint venture and will hold a majority share of 51%. The closing of the transaction is expected by the end of the year. The company will take over production of SANY’s current engine range with the aim of supplying SANY with around 75,000 new engines in 2022. These engines will comply with the China IV emissions standard for off-road applications and China 6 for on-road applications.
In addition to the successful conclusion of the joint venture deal with SANY, other elements of the international growth strategy are also going to plan in China. These include the strategic alliance with BEINEI to carry out production locally, with the DEUTZ management team overseeing the manufacture of approximately 20,000 engines for the Asian market in 2022 at a new factory in Tianjin. The ramp-up is set for 2020, when around 2,000 to 3,000 engines are to be produced.
Further progress has also been achieved in the partnership between DEUTZ and FAR EAST HORIZON to expand the local service business. With more than 80 branches, FAR EAST HORIZON is the largest player in China’s construction equipment rental business and the ideal partner to meet the growing demand for innovative engines. DEUTZ customers will soon be able to benefit from digital services such as a shared online shop.
“The joint venture agreement marks an important milestone in the implementation of our new China strategy,” says DEUTZ CEO Dr. Frank Hiller. “We are now ideally positioned to take advantage of the rapid growth in the world’s largest individual market for engines. The alliances with our local partners will enable us to significantly increase our local presence for engines and we now have access to an attractive production network that will enable us to efficiently meet customer demand in the region. We can also tap into an extensive service network that we will systematically enhance with digital solutions. In an initial stage, we aim to achieve revenue of around half a billion euros by 2022.”1
The Chinese engines market has grown steadily in recent years and the uptrend is set to continue for some years to come. Growth of up to 5% is forecast in China’s construction equipment application segment in 2019, while in material handling it is set to be up to 10%.2
1 The Joint Venture will be consolidated using the at equity method.
2 Growth in unit sales; DEUTZ market estimates.