German company Deutz, one of the world’s major manufacturers of innovative drive systems, has entered into a joint venture agreement with SANY, China’s largest construction equipment manufacturer.
Cologne-based Deutz will be investing “a mid-double digit million” euro amount in the new joint venture, and will hold a majority share of 51 percent, it said in a June 3 statement.
The transaction is expected to close 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. The engines will comply with the China IV emissions standard for off-road applications, and China 6 for on-road applications. The initial revenue target is 500 million euros (US$565.6 million) for 2022
Deutz said that in addition to the joint venture with SANY, other elements of its international growth strategy are 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 viewed by Deutz as an ideal partner to meet the growing demand for innovative engines.
“The joint venture agreement marks an important milestone in the implementation of our new China strategy,” said 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.”
The Chinese engines market has grown steadily in recent years, and the upward trend is forecast to continue. 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%, according to Deutz market estimates for growth in unit sales.