Success story of Weichai Power aims to inspire
Weichai Power, a notable Chinese powertrain manufacturer based in Weifang, Shandong province, shared its experience of achieving a 30-time increase in market value compared to its initial public offering during an academic seminar held on Tuesday to showcase the 20-year reform, innovation and development achievements.
The company said its current total market value exceeds 140 billion yuan ($19.4 billion). At its highest, the market value was 40 times that of its IPO. The company’s operating income has grown from 6.2 billion yuan in 2004 to 214 billion yuan in 2023, a 33-fold increase, with a cumulative income of 1.87 trillion yuan. The net profit attributable to the parent company has grown from 540 million yuan in 2004 to 9.01 billion yuan in 2023, a 16-fold increase. Its cumulative net profit hit 93.6 billion yuan.
Tan Xuguang, chairman of Weichai Power, said such figures show its comprehensive strength, investment value and brand influence have been recognized by the capital market worldwide.
On March 11, 2004, Weichai Power was listed on the Hong Kong Stock Exchange, becoming the first Chinese company engaged in the internal combustion engine industry to be listed in Hong Kong. With an oversubscription of 928 times for the IPO and 52 times for international placements, it raised $170 million. The figures broke the record, held since 1998, for H-share market IPOs on the main board of the Hong Kong Stock Exchange.
On April 30, 2007, Weichai Power acquired Xiang Torch — now known as Weichai Torch Technology — by stock absorption. The company was then listed on the Shenzhen Stock Exchange, becoming a blockbuster case realizing a dual listing in Hong Kong and Shenzhen.
Repeating this merger and acquisition model, Weichai Power made the Italian luxury yacht manufacturer Ferretti Group become the first company in the world to achieve dual listings in Hong Kong and Milan.
In Tan’s view, Weichai Power’s success can be attributed to a number of main factors. First, the dual-drive strategy focusing both on product and capital operation is the key to promoting its expansion.
Tan said that without good products, there is nothing. Capital operation enables rapid industrial expansion, serving as a powerful means to magnify competitiveness.
Each merger and acquisition has improved Weichai Power’s products, technology and industry chain, which fundamentally upgraded its industrial structure and development model.
Weichai Power refuses to do noncore business, low value-added products or repetitive scale expansion as it focuses on the power engine field. With the determination to “excel in one type of product for a lifetime” and the strategy of “dedicating itself to its core business and pursuing excellence”, Weichai Power has made the Chinese internal combustion engine industry truly outstanding on the global stage, Tan said.
Core technologies that cannot be replicated are another competitive edge of Weichai Power. According to Tan, winning global competition relies on first-class products, technology and talent, and the company regards cutting-edge technology as a top priority.
Tan also emphasized Weichai’s advantage in having an industrial structure with a highly consistent development pattern for its overall layout. Besides Ferretti, the structure includes Shaanxi Heavy Duty Automobile, Weichai Lovol Intelligent Agricultural Technology and German forklift manufacturer Kion Group. The collaborative research and development of these companies has extended Weichai Power’s core competitiveness.
Shandong is a major economic province in China with a high proportion of its economy being Stateowned. In recent years, its government has placed great significance on utilizing the capital market to promote the high-quality development of provincial State-owned enterprises.
Man Shen’gang, director of the Shandong Provincial State-owned Assets Supervision and Administration Commission, described Weichai Power’s sustained high-quality development over the 20 years as a “miracle” as it started as an engine manufacturer and now covers multiple business sectors. These include power systems, commercial vehicles, agricultural equipment and intelligent logistics. Weichai Power will continue to integrate high-quality resources globally through the capital market.
Weichai Power’s case provides a reference for linking the capital market with Shandong’s SOEs. Man said he hopes that the company will create a distinctive development paradigm for SOEs and promote economic and social development throughout the province.