Posted : 2017-10-29 15:55
Updated : 2017-10-29 17:57

Hanon Systems expands in China

Hanon Systems CEO Lee In-young, left, poses with Chongqing Jianshe Mechanical and Electrical Equipment Chairman Li Hua Guang, center, and Chongqing Jianshe Motorcycle Chairman Lu Hong Xian during a joint venture signing ceremony held in Beijing, Oct. 25. / Courtesy of Hanon Systems

By Jhoo Dong-chan

Hanon Systems has established a joint venture with China South Industries Group Corp. (CSGC), to enter the world's largest automobile market.

Korea's largest manufacturer of air-conditioning and heating systems for vehicles said Sunday it signed a joint venture deal with CSGC's two affiliates _ Chongqing Jianshe Motorcycle and Chongqing Jianshe Mechanical and Electrical Equipment _ last week.

Hanon Systems invested a total of 72.5 billion won ($64.1 million) to have a 50 percent share in the joint venture, while Chongqing Jianshe Motorcycle and Chongqing Jianshe Mechanical and Electrical Equipment have a 25.36 percent and 24.64 percent share, respectively.

Hanon Systems said the firm will be established by the end of this year if approved by the Chinese government.

Under the jont venture, Hanon Systems is expected to supply not only its air conditioning but also eco-friendly auto parts products in China. The firm's top-notch auto compressor products will also be produced at the Chongqing Jianshe production plant, which is scheduled to be completed in 2019.

A Hanon Systems official said it will also sell the firm's eco-friendly Heat Pump System while investing to introduce heating ventilation and air conditioning as well as powertrain cooling products through the joint venture.

"The deal is monumental considering the deteriorated market environment in China," said a Hanon Systems official.

"Still, the Chinese market is an attractive one that shouldn't be overlooked. The joint venture will be Hanon Systems' future growth engine."

CSGC is China's state firm that operates various businesses including automobile, energy and construction equipment affiliates. The group employs 240,000 employees while marking 80 trillion won in annual sales, making it one of the world's top 500 companies in size.

The group's affiliate Changan Automobile is also one of China's largest automakers that annually produces 2.5 million cars. It also has joint ventures with global carmakers like Ford, Mazda and Suzuki.

Employing about 16,500 workers at its four R&D centers and 40 manufacturing sites in 19 countries around the world, Hanon Systems has maintained the No. 2 place in the global vehicle air conditioning industry next to Japanese powerhouse Denso. It recorded 5.7 trillion won in sales and 423 billion won in operating profit last year.

In the second quarter of this year, the company earned 1.37 trillion won in sales, down 7.9 percent from the previous year. But its operating profit rose 8.1 percent to 103 billion won, thanks to soaring sales of air-conditioning systems and other auto parts for electric and energy-efficient cars.

Hanon Systems, formerly known as Halla Visteon Climate Control Corp. is controlled by Hahn and Company, a private equity fund, which holds a 50.5 percent stake. Hankook Tire also holds a 19.49 percent stake, with the remaining shares being floated on the main KOSPI market.

In December 2014, the two domestic companies acquired their stakes from Visteon for 4 trillion won.

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