Keeping Up Europe As Engine Of New Growth

A Yuchai worker assembles a diesel engine at a workshop in Yulin, Guangxi Zhuang autonomous region. More than 90 percent of Yuchai Machinery's sales are now concentrated in Southeast Asia, the Middle East, South America and Africa where infrastructure construction is taking off.

Guangxi Yuchai Machinery Group Co Ltd, the largest internal combustion engine manufacturer in China, aims to tap developed markets in Europe by cooperating with top European engine producers, according to top executives of the company.

Founded in 1951 and headquartered in Yulin, Guangxi Zhuang autonomous region, Yuchai Machinery has been the standard-setter as far as Chinese internal combustion engines are concerned. Its assets are worth 32.7 billion yuan ($4.9 billion).

"We always look up to the emission standards of Western countries, staying ahead in technological capacity. Now, we are building engines that meet the Euro 6 emission limits that are in effect in Europe since 2013," said Guo Deming, deputy Party chief of Yuchai Group.

China is going to implement the fifth generation of national emission standards in an all-round way in 2017, which are the equivalent of the Euro 5 emission limits observed in Europe from 2008 to 2013.

Under the Euro 6 emission limits, soot emission per kilometer must be lower than 5 milligrams and nitric oxide per kilometer lower than 80 milligrams, which are one-fifth and one-fourth respectively of the Euro 4 standards.

"Automobile emissions that meet the Euro 6 standards are even cleaner than the average air quality in Beijing," said Guo.

Keeping up with the top standards helps Yuchai Machinery to enter developed countries, where the recognition of Chinese brands is not high, according to Huang Yi, deputy general manager of Yuchai Sales Company.

"Developed countries have mature market economy rules. Having a presence in these countries is a touchstone for our own competence. We will suffer great losses if our products in these markets are found to be problematic, which is a driving force for us to keep improving the quality of our products," said Huang.

At the moment, more than 90 percent of Yuchai Machinery's sales are concentrated in Southeast Asia, the Middle East, South America and Africa where infrastructure construction is taking off. The 10 member-countries of ASEAN represent its largest market. In 2015, they accounted for sales of 30,000 units out of the total overseas sales of 40,000 units.

Yuchai Machinery has been collaborating with FEV GmbH in Germany, one of the top three automobile engine companies in the world, Ricardo Plc in Britain and AVL List GmbH in Austria. It has a research center in Aachen, Germany, where the RWTH Aachen University acts as a talent pool for FEV.

Yuchai Machinery has recently signed an agreement with MTU, a German manufacturer of large diesel engines and complete propulsion systems, to establish a joint venture. The JV will use MTU's technologies related to its S4000 engine series to produce high-end, high-power and high-speed auto engines in both China and overseas.

Meanwhile, Yuchai Machinery is cooperating with Brunel University in Britain on oil and gas hybrid power research.

"Hybrid power is the future. It is used in high-end cars, which consumes slightly over 3 liters of oil per 100 kilometers. As the emission standards increase, new energy engines will enjoy a bigger market," said Huang.

Yuchai Machinery invests 3.5 percent of its revenue in research and development. It has more than 3,000 patents with 500 to 600 new patents coming up every year. Even though it is strictly controlling its operation costs at the moment, the R&D investment has never been cut.

"The consistent research efforts have put Yuchai Machinery on a par with foreign brands. It first distinguished itself from foreign competitors in the bid for bus engines for the Beijing Olympics in 2008. Since then, Yuchai Machinery has been the major automobile engine supplier for major events such as the Two Sessions (the annual gatherings of the Chinese national legislative and political advisory bodies) and the Hangzhou G20 Summit," said Huang.

Yuchai Machinery has 15 offices and 133 service stations overseas that help sell its products to 170 countries and regions. In 2015, overseas markets accounted for 11 percent of total sales.

From 2011 to 2015, Yuchai Machinery exported 166,000 engines to overseas markets, up more than 50 percent compared with the 2006-10 period.