China: JV Shanghai MHI Engine Begins Operation

Shanghai MHI Engine Co., Ltd., a manufacturer and marketer of diesel engines jointly established by Mitsubishi Heavy Industries, Ltd. (MHI) and Shanghai Diesel Engine Co., Ltd. (SDEC) – a major Chinese diesel engine manufacturer – has launched operation.

The JV aims to establish a solid position in the rapidly expanding Chinese market for industrial-use diesel engines by building up market share through more competitively priced products.

To celebrate the commencement of operation, Shanghai MHI Engine today held an opening ceremony at the company’s site in Huangpu, Shanghai. Officials and executives attending the ceremony included: Tang Haidong, Deputy Governor of Shanghai’s Yangpu District; Xiao Guopu, Vice President of Shanghai Automotive Industry Corporation (SAIC); Wang Xiaoqiu, General Manager of SDEC; Hideaki Omiya, President of MHI; and Atsushi Maekawa, MHI Executive Vice President and Head of General Machinery & Special Vehicles.

Shanghai MHI Engine was established this February based on a JV agreement signed in March last year between MHI and SDEC. The JV is capitalized at 200 million yuan (approx. 3 billion yen), with ownership divided equally between the two companies. It manufactures industrial-use diesel engines with power outputs in the 500 to 1,600 kW range under a manufacturing and marketing license from MHI. Leveraging MHI’s advanced technology in industrial-use diesel engines and SDEC’s vast domestic networks in procurement, marketing and after-sale services, the JV targets annual sales of 10 billion yen within several years and intends to boost this figure eventually to 20 billion yen.

SDEC is one of China’s leading diesel engine manufacturers and an affiliate of SAIC, the country’s largest automaker. SDEC’s 100 to 500 kW high-speed diesel engines for construction machinery, power generation and marine use hold a large share of the domestic market.

MHI has for some time been seeking to build up its share in the rapidly expanding Chinese market, while SDEC has been looking to launch full-scale entry into the market for industrial-use diesel engines with outputs above 500 kW. The JV commenced operation to fulfill the intentions of both companies. In tandem with SDEC, MHI will provide support to get the JV’s business on track quickly.

In China, besides a rapidly growing diesel engine market, distributed power generation using more environmentally friendly natural gas as fuel is also expected to expand. However, because the Chinese authorities require a high level of local content for participation in this market, local production is indispensable. The new JV is also intending eventually to enter the gas engine market, and plans call for aggressive pursuit of new market opportunities of this kind, targeting further expansion of its presence in the Chinese market.

[mappress]

Press Release, March 11, 2013