The synergy effect of Weichai Group's reorganization with Lovol is obvious, and the market increment of Weichai Power's agricultural machinery and construction machinery is expected to be promising

One month after Weichai Group's reorganization of Lovol Heavy Industry, Lovol's performance increased significantly year-on-year, and the synergy effect also brought a notable increase to Weichai Power. Given Weichai Power's technological leadership in the engine field and the company's upcoming launch of CVT powertrains and hydraulic powertrains, industry insiders predict that the reorganization of Lovol Heavy Industry will bring an additional 100,000 units of supporting equipment to Weichai Power in new fields such as agricultural machinery and construction machinery.

In December 2020, Weichai Group carried out a strategic reorganization of Lovol Heavy Industry. In the first month after the reorganization, a strong synergy effect was highlighted. In January 2021, the sales volume of agricultural equipment of Weichai Lovol Heavy Industry increased by 149% year-on-year, its operating income rose by 118% year-on-year, and its profit increased from a loss of 80 million yuan in December 2020 to a profit of 30 million yuan in January 2021.

Liewo Heavy Industry is one of the leading agricultural equipment manufacturers. According to the data of 2019, in the large and medium-sized tractor market, Lovol ranked second with a market share of 21.8% (only behind First Tractor). In the rice machine market, Lovol ranks second with a market share of 13.3% (second only to Wode). Lovol ranks first in the wheat machine market, with a market share of 48.8%. The market shares of Lovol and Juming in the corn machine market are similar. Lovol's market share is 23.5%, while Juming's is 23.7%. Meanwhile, Liewo Heavy Industry also holds an important position in the field of construction machinery. Previously, the proportion of engines sold by Weichai Power to Lovol Heavy Industry was relatively small. With the reorganization of Lovol Heavy Industry by Weichai Group, the mechanical supply of Lovol Heavy Industry to Weichai Power's products has naturally emerged. Weichai Power will have a certain growth in the fields of agricultural machinery, construction machinery, etc.

However, Weichai Power is not merely content with the current supporting market of Lovol Heavy Industry. Judging from the investment items of Weichai Power's private placement, its layout in the high-end agricultural equipment and construction machinery markets has long been underway and is intended for the long term.

It is learned that Weichai Power will invest 3 billion yuan of its current private placement funds in hydraulic powertrains and CVT powertrains. Hydraulic powertrains are matched with agricultural machinery and construction machinery, and CVT is benchmarked against high-end agricultural equipment. These are precisely the key development directions for Lovol in the future.

It is understood that Weichai Power, relying on the heavy-duty transmission platform, has significantly reduced costs and improved efficiency. Its first tractor continuously variable transmission CVT system with completely independent intellectual property rights, the 240-horsepower product, has entered the small-scale market verification and is expected to be officially launched in batches in the second half of 2021. The high-end tractor of Lovol equipped with a 340-horsepower CVT product will roll off the production line in the first half of 2021. Weichai Power has developed high-end hydraulic powertrains and large CVT powertrains, which have completed market validation and achieved independent control of key core technologies.