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But the company quickly recovered after adjusting its business strategy, reinforcing technological innovation, and reforming its corporate management.
In October, Weichai launched its new high-speed diesel engine, the WD12, which is China's first 12-litre 480 horsepower engine with independent intellectual property rights.
This year it also signed a strategic co-operation agreement with the German industrial giant Bosch on development and supply of a high-speed diesel engine.
The booming Chinese auto parts market has attracted more and more domestic and foreign companies.
In October, the world's biggest diesel engine maker Cummins clinched a deal with Chinese truck producer Beiqi Foton Motor to create an engine joint venture in Beijing.
The two sides plan to invest a total of 2.5 billion yuan (US$316 million) in the joint venture, which has registered capital of 1 billion yuan (US$126 million), said Cummins.
The venture, which will start to make Cummins 2.8 and 3.8-litre diesel engines in 2008, will have an annual production capacity of 40,000 engines, according to the US engine group.
The project is part of Cummins' plan to increase its investments in China by US$300 million by 2010 in order to boost local sales.
According to the China Association of Automobile Manufacturers, both China's production and sales of automobiles are expected to surpass 7 million this year.
The association made the prediction based on the country's automobile production and sales situation in the first 10 months of this year, which hit 5.89 and 5.77 million autos. That was a 27.56 and 25.69 per cent jump respectively from the same period in 2005.
In October alone, China produced 588,800 automobiles, up 41.43 per cent from October last year. Sales totalled 576,300 autos, an increase of 27.55 per cent, said the association.
But statistics show that China's auto industry still lags behind that of developed countries in R&D innovation, brand building, enterprise size and profits on exports.
China's auto exports accounted for merely 1.1 per cent of the world's auto trade volume and 7.3 per cent of the nation's auto industry value in 2005, according to the Ministry of Commerce.
Developed countries such as Japan and Germany sold over 40 per cent of their auto products overseas.
Technology and emission standards as well as safety regulations in developed countries have been big problems for Chinese auto exports.