Xuzhou Machinery buys 60% stake in Chunlan Auto

Shanghai, July 14 (Gasgoo.com) Xuzhou Construction Machinery Science & Technology Co, a maker of construction equipment, said on June 10 it would pay 270 million yuan ($39.36 million) for a 60 percent stake in Jiangsu Chunlan Automobile, according to a Reuters report.

The purchase will allow Xuzhou access to the heavy truck industry, copying the development path of global leading equipment makers such as Volvo, the company said in a statement published in the China Securities Journal, cited by Reuters.

Chunlan Group, based in the eastern province of Jiangsu and a maker of air conditioners, entered the auto industry in 1997. Now the Chunlan Automobile produces five series of heavy trucks with load limits of 12-31 tons.

But Chunlan has seen dramatic loss in its auto business in recent years. Chunlan Automobile reported loss of 55.1 million yuan in 2007 and 23.2 mln in the first half of this year.

Industry analysts say that in order to turn around losses Xugong will have to make heavy trucks with large capacities as the market for light trucks is near the saturation point.