SORL Auto Parts, a manufacturer and distributor of automotive air brake valves and related components in China, through subsidiary, Ruili Group Ruian Auto Parts, has purchased land rights, a manufacturing plant and office buildings from Ruili Group for RMB152m ($US20m).
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The company currently leases from Ruili and occupies approximately 50% of this production facility. Ruili will vacate the rest of the facility by the end of October.
As a result of this transaction, the acquired capacity expansion is expected to meet the company’s growth demands for the next two to three years.
The purchase price will be paid by transferring to Ruili SORL’s $9m investment in an existing project that includes a new-facility- in-progress and prepayment of land use rights, with the balance of $11m to be paid by the end of October 2007 from the company’s existing bank credit line.
“In order to solve the current production capacity bottleneck and meet the fast growing demand for our products in the domestic OEM, aftermarket and international markets, we have decided to purchase Ruili Group’s existing facility and scale up our capacity quickly to capture the market opportunity,” said Xiaoping Zhang, CEO of SORL.
“Completing the new facility under construction would have delayed our capacity expansion until late 2008 and hindered our near-term growth. The Chinese commercial vehicle market has experienced significant growth this year and especially for heavy trucks. We are benefiting from the growth of commercial activity in China as well as robust government spending on infrastructure build out and the maturing of the domestic logistics industry.
“We see very favourable market conditions for commercial vehicle auto parts. The land use rights and facilities purchased will add to our production starting in the late fourth quarter of 2007.”
SORL Auto claims to rank first in market share in the segment for commercial vehicles weighing more than three tons, such as trucks and buses. The company distributes its products both within China and internationally under the SORL brand. Its product range includes 40 types of air brake valves and over 800 different specifications.
It has international sales centres in Australia, United Arab Emirates, and the United States, with additional offices planned for other locations.
