Recently, Xu Hong, secretary of the party committee and vice general manager of Weichai Group Holdings Limited (Weichai Group) says that Weichai Group aims to create another group with an output value of 50 billion yuan centering on hydraulic system manufacturing in the coming five to eight years in order to break the foreign monopoly of high-level hydraulic parts.
Bottleneck
“In the engineering machinery industry, the man who masters hydraulic control systems wins the market”, Xu Hong says.
The hydraulic control system is regarded as a bottleneck restricting the development of China’s equipment manufacturing industry. In quite a long time, the global hydraulic system is monopolized by Germany Rexroth Bosch, American Eton, and Japanese Kawasaki. To cope with this situation, Chinese government also makes clear to focus on the development of hydraulic products in the “Twelfth Five-Year Plan” for high-level equipment manufacturing industry.
The hydraulic system is crucial to quality and safety of engineering machinery. For example, Xu Hong says, a 50m aerial ladder fire truck is mainly relying on the hydraulic system to stretch, so it is easily to break off if the hydraulic is not stable.
Hence, the hydraulic control system takes up a considerable proportion in the cost of engineering machinery due to its importance. “To take excavator as an example, hydraulic control system accounts for 25% in the costs of complete vehicle”, deputy chief engineer of Shandong Strong Construction Machinery Liu Daiyong says. For excavators of Shandong Strong Construction Machinery, over 80% hydraulic systems are imported and core components of hydraulic systems like main pumps and valves are almost all imported.
Deputy Director of MIIT Policy Department Xin Renzhou says recently that Chinese high-level equipment manufacturing industry is largely relying on importing and most profits are earned by foreign manufacturers. In the “Twelfth Five-Year Plan for Machinery Basic Parts, Basic Manufacturing Technique and Basic Materials” clearly points out the development index for hydraulic parts—sales amount rising to 70 billion yuan in 2015 from 35.1 billion yuan in 2010.
Seeking for changes
Weichai Group has been targeting at this market since long time ago. In September 2012, Weichai Power Co., Ltd. (subsidiary of Weichai Group, stock number 000338) signed a strategic cooperative agreement with German Kion. According to the agreement, Weichai Power acquired Kion at a price of 738 million euros, 271 million euros of which are used for acquiring 70% share of Kion’s Linde Hydraulics.
Linde Hydraulics, leading in global static hydraulic pressure technology, is a major supplier of world-class industry manufacturers like Caterpillar, Volvo and Liebherr.
General Secretary of the Party committee of Weichai Technical Center Zhang Donghai says the introduction of Linde Hydraulics will advance Chinese engineering machinery manufacturing technology for 10 to 20 years.
On June 29, 2013, Kion is listed in German Frankfurt Stock Exchange. Weichai Power further increases its share in Kion to 30% of shareholding equity through call options. According to Zhang Zhengqiang, director of policy research office of Shandong Heavy Industry Group (parent company of Weichai Group), the cooperation with Kion will continue, including the hydraulic systems.
Weichai Group targets at a sales revenue of 200 billion RMB by 2020 and strive for the World Top 500.
