Weichai Power (2338.HK) has announced the formation of a long-term strategic alliance with China FAW Group, marking a significant shift in its business relationships. This development comes after Weichai Power's previous partnership with China National Heavy Duty Truck (Sinotruk) was officially dissolved. As a result, the joint VOLVO engine project involving Sinotruk, Volvo Trucks, and FAW Group has been formally abandoned.
Just months after parting ways with Sinotruk, Weichai Power found a new partner in FAW Group. According to the agreement, all heavy vehicles equipped with engines over 340 horsepower from FAW’s "Liberation" brand will now use Weichai’s WD and WP series engines. Additionally, both companies are working on setting up new collaboration platforms to leverage their respective strengths and explore new market opportunities.
The VOLVO engine project, which was initially signed in March 2004 by Volvo, Sinotruk, and FAW, had aimed to establish a joint venture for high-power engine production in Jinan, with an annual capacity of 50,000 units between 2005 and 2008. However, the project faced delays due to growing tensions between Volvo and Sinotruk, leading to its eventual collapse just two years after the original agreement was signed.
FAW Liberation’s General Manager’s Office recently confirmed that they will begin using Weichai Power engines in their 300hp or higher heavy trucks, including future models, as part of the new partnership. This move is seen as a strategic step to strengthen FAW’s position in the competitive commercial vehicle market.
According to automotive analyst Jia Xinguang, Weichai Power’s decision to cut ties with Sinotruk earlier this year was a calculated move, and the company quickly found a new strategic partner in FAW. Both FAW and Dongfeng have long dominated the heavy truck industry, with combined annual outputs exceeding 100,000 units. Weichai’s shift away from Sinotruk, despite years of collaboration, reflects its ambition to align with stronger market players.
However, the commercial vehicle sector remains challenging. Since last year, the market has been in a downturn, with both FAW and Dongfeng experiencing declining sales. In the first half of this year, Dongfeng Commercial Vehicle Co., Ltd. saw a year-on-year drop of 32.43%, while FAW Group’s commercial vehicle sales also fell by more than 4%. Although Sinotruk managed a 40% growth rate, it was based on a very low base from the previous year. The overall market slump continues to pose challenges for Weichai Power, even as it expands its partnerships.
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