CHINA: Antonov 'secures additional customers' in China
Transmission technoogy company Antonov says that it has secured additional customers in China and that it has received 'strong government support' for its already announced six-speed automatic transmission plant in Chong Qing.
In addition to the customer win with Lifan Motors announced on 4 December 2008 for its new TX6 six-speed automatic transmission, the company says it has now secured two further customer orders in China for its products.
In addition, the ongoing discussions with the municipal Chong Qing government for the set up of a Chinese plant for the production of its automatic gearbox have concluded that Antonov can access the majority of the funding required to set up its Chinese production from Chinese sources.
Antonov said the developments create a solid platform for ongoing commercial negotiations with potential partners for the planned manufacturing joint venture in Chong Qing.
Demonstrations of the Antonov test vehicle continue in Shanghai and further vehicle makers will be added to this initial customer list over the next six months, it says. Further orders will be sought late in 2009 once pre-production units are available, the company said.
Commenting on the customer orders, John Moore, CEO said: "This is excellent news which represents significant progress in the commercialisation of our technology within the important Chinese car manufacturing marketplace. With each new customer win, we strengthen our commercial position enabling the group to secure better terms with both suppliers and customers and in turn to maximise the returns from the planned manufacturing joint venture."
The company has held discussions with government agencies in relation to the following funding options that are available to support the development of the Chinese production plant:
- Land and custom buildings and infrastructure can be provided in a suitable economic development zone to lease, avoiding the need for Antonov to make any upfront capital investment;
- Bank loans for the purchase of capital plant and tooling can be underwritten to enable preferential interest rates to be obtained;
- A specific investment fund has been set up jointly between the government and banks to provide equity funding for high technology manufacturing and the Antonov production plant qualifies for this funding.
These options will provide substantial support for the planned investment in the Chinese production plant and can, in aggregate, meet more than half the estimated funding requirement of EUR40m, Antonov claims.
In setting up the manufacturing Joint venture, the Chinese partners will invest cash and Antonov will bring its past product development investment and some new cash.
In combination, the company now expects that its total cash contribution to the joint venture will not exceed 10% of the total funding requirement to achieve a 49% equity stake.
Whilst Chinese joint ventures must be majority owned by Chinese operations, the support of the local investment fund will ensure that Antonov retains the largest shareholding in the venture. In the short term, the municipal government has also offered to co-fund the initial Lifan vehicle prototype program as a demonstration of its commitment to attract Antonov to Chong Qing.
Commenting on the funding options, John Moore, added: "The work we have done in the last 12 months to bring our product to China and secure customers has greatly strengthened our commercial position.
"In the light of these other funding sources available to us, we can now drive for a much better deal for our shareholders in our joint venture negotiations by maximising the value placed on the existing product investment we have made in the last three years and minimising the new investment Antonov must make to secure our stake in the manufacturing joint venture."