China is proving a happy hunting ground for Advanced Engine Components with the company signing a second deal there that could be worth at least $4 million.
The company has struck a deal with Weichai Power Co Ltd, one of China’s largest manufacturers of bus and truck engines, to develop technology and supply components to adapt one of Weichai’s heavy duty diesel engines to run on natural gas and liquefied petroleum gas.
AEC managing director Tony Middleton said the Weichai deal would take about nine to 12 months in the engine development phase before AEC would have a product specific to Weichai’s engines.
“We’ll be able to supply them with a product that can be certified for Chinese and world-wide use,” he said.
“If we only deliver 1,000 units to Weichai, that’s the low end of the market, that’s $4 million.”
“They’re [Weichai] talking about 5,000 to 6,000 units.”
The first China deal AEC entered into was with First Auto Works which could also be worth at least $4 million.
AEC managing director Tony Middleton said the beauty of the two deals was that the two Chinese companies covered the large and small ends of the bus engine market.
Weichai’s diesels are in the nine to 11-litre range while FAW is in the 6.6-litre engine range.
Mr Middleton said AEC was also making the transition from a research and development company to an industrial products company.
Indeed, the company has undergone a significant amount of restructuring in the past year.
In August and December 2003 respectively, the company divested the “sexy” part of its business – the Bullet Supercar and the Sprintex Supercharger.
With those two businesses gone the company’s revenue bleed was stemmed. The company’s loss has fallen from $5.1 million last year to $1.9 million in 2004.
In May the company completed its $5 million project to convert 25 DaimlerChrysler buses under the Australian Greenhouse Office’s Alternative Fuels Conversion Program.
The company is continuing its component supply contract with the Irisbus of France and has components for more than 600 natural gas-powered buses.
