Weichai Power to offset surging steel costs by raising truck prices

PUBLISHED : Tuesday, 06 May, 2008, 12:00am
UPDATED : Tuesday, 06 May, 2008, 12:00am

Mainland diesel-engine and truck maker Weichai Power is hoping to offset the rising price of steel by charging higher prices for its heavy trucks and generating more sales with vehicles that meet higher emission standards.

'We've raised the price of every heavy truck we sell by 4,000 yuan (HK$4,462), so that can help offset surging raw-material prices,' said Dai Lixin, the company secretary.

Weichai Power, which indirectly owns 51 per cent of Shaanxi Heavy-Duty Truck after its acquisition of A-share component maker China Torch, marketed its heavy trucks at more than 30 per cent below the price of those made by Volvo, Daimler and Fiat's commercial vehicle unit Iveco - at 250,000 yuan each, a Standard & Poor's report said.

Listed on both the A-share and H-share markets, the Shandong-based company made China Torch its subsidiary last year by issuing new A shares. It now has three main businesses - diesel-engine production, parts production for heavy-duty trucks, and gearbox making.

Weichai Power's first-quarter net profit rose 180.32 per cent to 710.78 million yuan as revenue increased 20.11 per cent to 26.93 billion yuan.

'After the buyout of China Torch, the synergy of businesses has contributed to huge net profit growth,' said chairman Tan Xuguang.

The company estimated sales of its 12-litre high-power engines would reach 40,000 units this year, up 500 per cent from last year, and expected sales of multi-gear boxes to double to 66,000 units. It did not disclose the sales target for heavy trucks.

Weichai Power sold 60,020 heavy trucks last year, up 96.5 per cent year on year.

Data compiled by the China Association of Automobile Manufacturers showed sales of heavy trucks in the country hit 498,000 last year, up 62.2 per cent from 2006.

The Chinese Academy of Social Science estimated that about 2 million heavy trucks are on the country's roads. And with the mainland's massive infrastructure development under way, demand for new trucks in the country is estimated to be 300,000 to 400,000 units annually. Heavy trucks need to be replaced every five to seven years.

According to a Standard & Poor's industry report, Shaanxi Heavy Truck, the fourth-largest heavy truck maker by capacity, will continue to be a major force on the mainland, beating competitors with superior technology and meeting stricter emission standards.