Yuchai Machinery and German firm will invest 150m yuan in the project

Guangxi Yuchai Machinery Co Ltd, a major diesel engine manufacturer based in Yulin, Guangxi Zhuang autonomous region, has entered a 50-50 joint venture with MTU Friedrichshafen GmbH, a subsidiary of Rolls-Royce Power Systems, for the production of MTU diesel engines in China.

The companies will invest 75 million yuan ($11.5 million) each in the project. Production is expected to start in 2017 with an annual output of 1,500 MTU Series 400 diesel engines.

The engines are compliant with China Tier 3 emission standards with power outputs ranging from 1,400 to 3,490 kW and are primarily aimed at the Chinese off-highway market, said Ulrich Dohle, president of MTU.

They will be particularly suited to applications in power generation as well as the oil and gas industry, he said.

Yuchai Machinery is the largest independent diesel engine builder in China.

The joint venture will open up new growth opportunities for the two companies in China and elsewhere in Asia.

"China is the largest emerging market, which is the main reason for MTU to choose China," said Dohle.

The project will help growth and cut costs, he said.

Statistics from the Ministry of Environmental Protection show that each year around 2 million diesel engines are added to the off-highway market in China. Data also show that around 20 percent of more than 100 million ton diesel consumption in China is used by off-highway machines.

"The cooperation between Yuchai Machinery and MTU is complementary," said Yan Ping, chairman of Yuchai Group and Yuchai Machinery.

However, he acknowledged there are gaps between the Chinese diesel engine industry and those in the developed world.

Yan said the deal would benefit the entire production process.

The joint venture will be implemented in two phases.

In the first phase, parts from MTU, Yuchai Machinery and other Chinese suppliers will be assembled in the new production facility.

The products will be marketed by Yuchai Machinery as well as MTU Suzhou within China and MTU as well as its subsidiaries exclusively outside China.

In the second phase, the joint venture will expand its product series and markets based on demand.

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