China Specialist, Auto and Industrial Specialist

Victoria Li

20 years experience as sell side analyst focusing on China's Industrial and Auto sectors

Weichai Power (2338.HK): Engine Power Regained

China Auto: Stay with Conservative Players

Equity Bottom-Up

Weichai Power Co Ltd H / Equity Bottom-Up

Weichai Power, China's largest independent Diesel engine producer, has been looking for a new core business to survive in long term downward trend of its current core business (Diesel engine for commercial vehicle and construction machines) since 2012 when it acquired 25% stake of <a href="https://www.smartkarma.com/entities/21659" target="_blank" data-smartkarma-citation="entities:21659:1">KION Group AG (KGX GR)</a>. By now Weichai owns KION (materials handling equipment), Dematics (integrated automated supply chain technology, directly own ed by KION),  <a href="https://www.smartkarma.com/entities/19412" target="_blank" data-smartkarma-citation="entities:19412:1">Power Solutions International (PSIX US)</a> (cleantech engine). It also has stakes in <a href="https://www.smartkarma.com/entities/25813" target="_blank" data-smartkarma-citation="entities:25813:1">Ballard Power Systems (BLDP CN)</a> (PEM fuel cell products), <a href="https://www.smartkarma.com/entities/23438" target="_blank" data-smartkarma-citation="entities:23438:1">Ceres Power Holdings (CWR LN)</a> (fuel cell technology and engineering). Lately, Weichai entered into an agreement with Westport Fuel System (WPRT.US) to develop and commercialise HPDI 2.0.It seems Weichai decides to put its chip on fuel cell and low-emission engines. However, our analysis shows all the above investment would not be enough to secure Weichai's market outlook in the next 5-10 years. This note focus on an evaluation of Weichai's technology choices on a 5-10 year time horizon. We will discuss the company's 12-months view in another note.

Weichai Power, China's largest independent Diesel engine producer, has been looking for a new core business to survive in long term downward trend of its current core business (Diesel engine for commercial vehicle and construction machines) since 2012 when it acquired 25% stake of KION Group AG (KGX GR). By now Weichai owns KION (materials handling equipment), Dematics (integrated automated supply chain technology, directly own ed by KION),  Power Solutions International (PSIX US) (cleantech engine). It also has stakes in Ballard Power Systems (BLDP CN) (PEM fuel cell products), Ceres Power Holdings (CWR LN) (fuel cell technology and engineering). Lately, Weichai entered into an agreement with Westport Fuel System (WPRT.US) to develop and commercialise HPDI 2.0.It seems Weichai decides to put its chip on fuel cell and low-emission engines. However, our analysis shows all the above investment would not be enough to secure Weichai's market outlook in the next 5-10 years. This note focus on an evaluation of Weichai's technology choices on a 5-10 year time horizon. We will discuss the company's 12-months view in another note.   

Weichai Power(2338.HK)： Fuel Cell Not the Answer (Yet), More Boldness Needed on All-Electric