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Russia & CIS Business and Financial Newswire
April 19, 2017 Wednesday 11:24 AM MSK
571 words
Kamaz plans engine JV with China's Weichai Power - paper
MOSCOW. April 19

Kamaz (MOEX: KMAZ), Russia's leading truck maker is planning to form a joint venture with China's Weichai Power to produce engines in Yaroslavl, national daily Kommersant reported on Wednesday, citing the minutes from a meeting of the Russia-China intergovernmental commission for investment projects.

The paper said a source at Kamaz confirmed that the project is at the exploration stage. The company is not disclosing the parameters of the project, but said that it installs Weichai engines on its gas-fuelled trucks at a rate of about 1,000 per year.

The Industry and Trade Ministry has not been consulted on the project, the ministry said. An industry source said Kamaz could house the venture at the Tutayev Motor Plant, in which it owns a 49.95% stake, the paper reported.

Weichai Power is one of the largest engine makers in China. The company's Russian representation, Weichai-Rus Tradeinvest (WRTI) could not be reached, the paper said. According to the distributor, Weichai Power products are shipped to Russia and there are dealers in Moscow, Astrakhan, Belgorod, Nizhny Novgorod and Omsk.

WRTI's revenue more than doubled to 55.9 million rubles in 2015, but the company posted a net loss of 4.3 million rubles compared to a profit of 5.9 million rubles a year earlier, the SPARK-Interfax database shows.

This is not the first attempt at cooperation with Chinese companies for Kamaz, which does not export trucks to China. Company CEO Sergei Kogogin has been open about the fact that Kamaz is looking for ways to enter this market.

In September 2015, a framework agreement was signed with Hawtai Motor to form a joint venture to produce and sell vehicles in Russia and China. There were plans for Kamaz to start assembly at Hawtai facilities and for the Chinese company to use part of the facilities of the Russian company. This project has been suspended, as the partner failed to fulfil part of the obligations under the agreement as it did not get a license to produce trucks, Kommersant said.

Weichai Power has also previously tried to enter the market of the Eurasian Economic Union (EAEU). In October 2016, the company signed a memorandum with Belarus on forming a joint venture to build diesel engines. The Belarusian Industry and Trade Ministry noted that the MAZ auto plant already uses these engines and said that the plant needed partners. A source on the Belarusian auto market said the implementation of the project with Weichai has not begun, the paper reported.

Until recently, engines in Russia were only produced by domestic companies Avtovaz (MOEX: AVAZ), the GAZ Group's Yaroslavl Motor Plant and the Tutayev Motor Plant. In 2015, Ford Sollers and Volkswagen Group opened plants with investments of respectively $275 million and 250 million euros. Mazda Sollers announced plans in 2016 to build a plant in Russia's Far East to produce engines for export, with plans to invest 2 billion rubles.

Since the engine is the most high-tech component of a vehicle, foreign companies are not interested in localizing production on foreign markets, as there is a risk that the technology will be borrowed, Dmitry Babansky of SBS Consulting said. In addition, there is a risk of reducing economic efficiency, both at existing plants due to transfer of a portion of workload to new facilities and from exports due to the logistics, he said.

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April 20, 2017
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