Weichai Power officially severs from Sinotruk

Recently, Weichai Power (2338 HK) announced in Hong Kong that it made clear distinction from Sinotruk on property rights and recovered a dealing nearly 200 million yuan.

According to the agreement, Sinotruk must repay Weichai Power 80 million yuan deposit and 13.5402 million yuan compensation in acquisition of Hangzhou engine plant on September 27, 2004. Meanwhile, Sinotruk's arrears 121 million yuan must be repaid by the end of 2005 (diesel engine and parts to Sinotruk sales), Total of 214 million yuan. Up to yesterday Weichai Power received 196 million yuan, accounting for 91.36% of total amount. The balance of 18.5144 million yuan has not been received yet.

Weichai Power is one of the largest domestic engine enterprises, once been major enterprises under Sinotruk. Weichai listed in Hong Kong in 2004, acquired Torch Automobile Group in August 2005, indirectly owned Shaanxi Automobile Group, and stated that it would like to create its own heavy vehicle industry chain publicly. As Shaanxi Automobile Group and Sinotruk are competitors, Sinotruk and Weichai conflicts erupted. In October 2005, Sinotruk had took back the control of Hangzhou engine plant trusted by Weichai. In January 2006, Weichai Power halted supplying engines to Sinotruk, which led a complete relations breakdown between the two sides.

Chen Qiaoning, Analyst from Tianxiang investment consultant indicated that a large amount of money purchasing Torch Automobile Group and indirectly owning Shaanxi Automobile Group, Weichai Power currently has enough internal resources for the core areas of heavy trucks. After breaking up with Sinotruk, Weichai Power is expected to the integration of assets under heavy truck parts and fulfill the dreams of heavy truck field.