The benefits of the strategic investment and collaboration agreement between PSI and Weichai Power Co. are plentiful. Since 2017, both companies have shared best practices in research, development, manufacturing, processing, distribution, procurement and finance. As a result of the collaboration, PSI and Weichai have expanded their market opportunities and gained significant product expertise.
The collaboration between PSI and Weichai deepened in late April 2019, when Weichai increased its ownership of PSI’s common stock to 51 percent. The increased investment reflects the ongoing success of the partnership and Weichai’s confidence in PSI. Weichai has a long track record of improving the sales, operations and technology of the companies it invests in while keeping the executive and operational staffs in those companies intact.
“People have asked me what changes will be made after Weichai becomes a 51 percent owner of PSI, and I have told them there is only one change – Weichai will give more support to PSI,” said Dr. Shaojun Sun, chairman of the board of PSI and director of Weichai Group Holdings Limited.
PSI CEO John Miller said the collaboration of the two companies’ products and management teams is critical to the success of the union. “We should all be excited about the future; I know I am,” he noted. “I want to thank everyone for their hard work and dedication.”
An Experienced Partner
Founded in 1946, Weichai Power employs approximately 77,000 employees – including 20,000+ research and development personnel – and sells products in more than 110 countries. In 2018, the company reported sales volume of 670,000 engines and a total of $23 billion (159,256 RMB, million) in revenue, the majority of which is from business outside of China.
In addition to its powertrain business, Weichai operates in the intelligent logistics, automotive, construction machinery, luxury yacht, and finance segments.
Weichai is led by Chairman and CEO Xuguang Tan, who also serves as president of Ferretti, S.p.A., a shipbuilder wholly owned by the company. The company’s global headquarters is in Weifang, China, and its North American subsidiary, Weichai America Corp., is based in Chicago.
The company has achieved a compound annual growth rate (CAGR) of 35 percent for each of the past 20 years. “Our business increases tremendously every year. This is a sign that we have a very good product, a very good employee team, and the resources to fulfill the requirements of the market,” Sun added.
A Global Footprint
Weichai and PSI’s combining of manufacturing and supply chain networks has increased our overall global footprint. Our total facilities now include more than 1 million square feet of research, development and testing facilities including 200 test cells. Weichai’s global footprint of more than 31 subsidiaries, 174 distributors and 500-plus service centers also contribute to the companies’ collective status as a world-class organization.
PSI has invested significantly in operational improvements to its facilities to accommodate new products developed as a result of the alliance with Weichai. These improvements encompass the re-organization of engine manufacturing operations in the 1465 facility into four lines including a dedicated area for diesel products and a line for 32-liter, 40-liter and 53-liter engines.
Expanded Product Line
Weichai’s product line of engines – which ranges from 2 liters to 110 liters and 18 kw to 4.3 MW of power – is highly complementary to PSI’s offerings. Combined, our portfolio offers the single most competitive and complete product line available in the market. “We find products that are most required and in demand by the market,” Sun said. “There is a very big synergy between PSI and Weichai’s products.”
In the past two years, our collaboration has produced 32-liter and 40-liter base engines that enhance our existing offerings to the energy and power generation markets. Together, we plan to launch a 53-liter base gas engine, as well as 4.5-, 6.7-, 9.7-, 12.5-, 17- and 20-liter diesel engines, in the North American market. “With these engines, we are providing our customers a product they have not been able to get from anyone else. This opens new markets for Weichai, and it opens new markets for us,” Miller said. “With these engines we are bringing the best world-class technologies to our customers.”
Both companies have extensive research and development capabilities. Weichai Power alone invested over $600 million (4.3 billion RMB )in 2018 on R&D and employs 1,800 research engineers and 700 application engineers. Meantime, in 2018, Weichai made strategic investments in the area of hydrogen and solid oxide fuel cell power system manufacturing, which opens new hybridization opportunities for Weichai and potentially PSI down the road.
Together with Weichai, PSI is enhancing its market opportunities in the energy, transportation and industrial engine business in China and other Asian and international markets.
Our companies are also leveraging PSI’s existing technology, experience and customer base to expand in the North American and global power systems markets. Energy end market product applications include commercial standby power; demand response (DR), mobile and prime power; microgrid, combined heat and power, and specialized power systems; including those that serve the oil and gas markets.
With the addition of the new engines, we will expand our addressable market for power generation products from less than $1 billion in 2018 to between $3 billion and $4 billion by 2023.
The transportation market is another area of growth for both companies. “We’re seeing new opportunities, new customers and new applications in transportation,” Miller said. “We’re also seeing opportunities for the 8.8-liter engine that PSI invested in to get to the marketplace. This is an engine we’re particularly proud of, and it gives us a unique niche in the marketplace.”
Our growth in transportation will be spurred in part by Weichai’s large market share in China. The company develops and manufactures thousands of commercial vehicle engines annually. Through its subsidiary companies – which include Asiastar Bus, a more than 60-year-old transportation market pioneer – Weichai operates more than 1 million square feet of manufacturing space in Asia. Having access to local manufacturing resources allows both companies to produce and develop alternative fuel engines for the Chinese transportation market.
“PSI is helping us bring our new products to the market and contributing to our collective future,” Sun said. “The continued work on the strategic collaboration between Weichai and PSI has been instrumental in getting us to this point, and we look forward to continued collaboration in the future.”
The addition of Weichai’s diesel product line to PSI’s product offerings returns us to a familiar market that once comprised more than 80 percent of our total sales. During our early years, PSI distributed 4.5-liter, 5.0-liter, 6.8-liter and 7.5-liter diesel engines for Perkins in a 12-state territory. The alliance with Weichai brings PSI more advanced, cost-effective diesel engine products and a much larger geographic sales area.
“We had tremendous success as a Perkins distributor, and this is an even bigger opportunity for us with both the bigger engines and the smaller engines we are now beginning to address with Weichai,” Miller said.
Together, PSI and Weichai will continue to prove that their powerful synergy can create an equation where one plus one equals more than two.
“What we’ve done here, and the support of Chairman Tan and Dr. Sun, Weichai America and everyone else is something that we should all be very proud of and something that I have great pride in as one of the people who started this journey together with them,” PSI Founder and Chief Strategy Officer Gary Winemaster said. “The culture between the companies and the cooperation we’ve had together has exceeded everyone’s expectations.”