Hong Leong Asia unit China Yuchai to jointly produce diesel engines with Rolls-Royce unit

CHINA Yuchai International, a Hong Leong Asia subsidiary, has inked an agreement with a subsidiary of Rolls-Royce Power Systems to set up a joint venture to produce diesel engines in China.

In the proposed 50-50 joint venture between Rolls-Royce unit MTU Friedrichshafen GmbH and New York-listed China Yuchai's main operating subsidiary Guangxi Yuchai Machinery Company Ltd (GYMCL), MTU diesel engines will be produced under licence from MTU.

Each party will invest 75 million yuan (S$16.2 million) in the joint venture, which will be based at GYMCL's primary manufacturing facilities in Yulin City in Guangxi province. Production is expected to begin in 2017.

"The joint venture will open up new growth opportunities for both partners, particularly in China and Asia," China Yuchai said on Friday. "The joint venture will enable better access to the Chinese market for the MTU Series 4000 diesel engines, via the extensive sales and service network operated by GYMCL."

The engines will be marketed by GYMCL and MTU Suzhou within China, and by MTU and its subsidiaries exclusively outside China. From 2020, the sales territory of GYMCL will be extended to selected countries in South-east Asia such as Vietnam, Thailand and Malaysia.

After a ramp-up phase of three to five years, the scope of the joint venture might (subject to further discussion) be extended to research and development activities as well as potentially direct sales from the joint venture to the customer.