| Weichai
Power Co Ltd, one of the largest diesel engine makers in China, agreed to buy
the remaining 71.88 % of Torch Automobile Group Co Ltd shares to obtain complete
stake control of the company, said Weichai yesterday.
The deal was subject
to approval by shareholders and China's regulatory body, it said in a statement.
Weichai will seek shareholder approval at a general meeting to be held
on December 29. Torch Automobile will hold a shareholders meeting on January 8.
The Hong Kong-listed Weichai said earlier it planned to list its A-shares
on the Shenzhen Stock Exchange after it privatises Torch Automobile.
In
2005 it bought stake in Torch Automobile and became one of the biggest shareholders
in the firm.
"The deal will help Weichai to streamline the company
structure," said Zhang Xin, an analyst with Guotai Junan Securities.
"It will enhance the company's position in the auto parts market as well
as in the heavy-duty truck market," he added.
As a major Chinese
automaker, Torch Automobile owns 51 % of Shaanxi Heavy-Duty Motor Co Ltd, one
of the five largest heavy-duty truck makers in China.
Weichai, which
used to produce engines for heavy-duty vehicles, was on the brink of bankruptcy
in the mid-1990s when China's heavy-duty vehicle market was experiencing a slump.
But the company quickly recovered after adjusting its business strategy,
reinforcing technological innovation, and reforming its corporate management.
In October, Weichai launched its new high-speed diesel engine, the WD12,
which is China's first 12-litre 480 horsepower engine with independent intellectual
property rights.
This year it also signed a strategic co-operation agreement
with the German industrial giant Bosch on development and supply of a high-speed
diesel engine.
The booming Chinese auto parts market has attracted more
and more domestic and foreign companies.
In October, the world's biggest
diesel engine maker Cummins clinched a deal with Chinese truck producer Beiqi
Foton Motor to create an engine joint venture in Beijing.
The two sides
plan to invest a total of 2.5 billion yuan (US$316 million) in the joint venture,
which has registered capital of 1 billion yuan (US$126 million), said Cummins.
The venture, which will start to make Cummins 2.8 and 3.8-litre diesel
engines in 2008, will have an annual production capacity of 40,000 engines, according
to the US engine group.
The project is part of Cummins' plan to increase
its investments in China by US$300 million by 2010 in order to boost local sales.
According to the China Association of Automobile Manufacturers, both
China's production and sales of automobiles are expected to surpass 7 million
this year.
The association made the prediction based on the country's
automobile production and sales situation in the first 10 months of this year,
which hit 5.89 and 5.77 million autos. That was a 27.56 and 25.69 % jump respectively
from the same per iod in 2005.
In October alone, China produced 588,800
automobiles, up 41.43 % from October last year. Sales totalled 576,300 autos,
an increase of 27.55 %, said the association.
But statistics show that
China's auto industry still lags behind that of developed countries in R&D
innovation, brand building, enterprise size and profits on exports.
China's
auto exports accounted for merely 1.1 % of the world's auto trade volume and 7.3
% of the nation's auto industry value in 2005, according to the Ministry of Commerce.
Developed countries such as Japan and Germany sold over 40 % of their
auto products overseas.
Technology and emission standards as well as
safety regulations in developed countries have been big problems for Chinese auto
exports.
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