KYMCO, Kawasaki Tie Up for General Purpose Gasoline Engine Production

The Kwang Yang Motor Co (KYMCO), Taiwan's largest manufacturer of powered two-wheelers (PTWs), recently announced that it had signed an agreement with Japanese PTW maker Kawasaki Heavy Industries Ltd. to set up a joint venture in Changzhou, Jiangsu Province. The new venture, the Changzhou Kawasaki & Kwang Yang Engine Co. (CK&K), is capitalized at US$10 million.

CK&K will produce general-purpose gasoline engines, and the two partners have set first-stage annual production target of one million engines within five years. The general-purpose engines, which are used in lawn mowers, generators, high-pressure cleaners, and other equipment, will be sold to customers all over the world under either the Kawasaki or KYMCO nameplate.

A senior KYMCO official reported that his company began cooperating with Kawasaki in 2003 by winning the local agency rights for Kawasaki's big-bore motorcycles, and the partnership expanded into the original design manufacturing (ODM) production of all terrain vehicles (ATVs) in 2005. Since that time, all Kawasaki ATVs have been supplied by KYMCO. The Japanese motorcycle maker also contracted KYMCO to supply other products, such as general-purpose engines and motor scooters, on an ODM or original equipment manufacturing (OEM) basis.

KYMCO originally supplied Kawasaki with engines that were produced by its Chinese subsidiary, Changzhou Kwang Hsing Precise Machine Co., at an annual volume of around 50,000 units. The two partners set up the new general-purpose engine manufacturer, with its high production target, to challenge the leadership position long held by Honda in the general-purpose engine market.

Industry sources said that while the global financial turmoil seriously affected the world PTW market, it deepened KYMCO's determination to further diversify its line of power products. They explained that the joint venture should give KYMCO rapid access to Kawasaki's world-class technical capability, and allow it to move quickly into other powered products such as jet skis and law mowers.

KYMCO has long been the No. 1 PTW brand in Taiwan and this year the company will challenge the leading position again for the 10th consecutive year. In the first half, KYMCO captured a 36.5% share of the domestic market.

The company has been actively developing overseas in recent years and has gradually formed a "golden triangle" of factories in Taiwan, China, and Vietnam, providing high-flexibility production. KYMCO operates two PTW assembly plants and two engine factories in China, as well as a PTW plant each in Vietnam and Indonesia.

Long Taiwan's largest exporter and producer of PTWs, KYMCO has set up subsidiaries and sales joint ventures in the U.S., the Philippines, the U.K., and Luxemburg. It has also been watching the Association of Southeast Asian Nations (ASEAN) market intently, and has gradually boosted its shareholding in KYMCO Vietnam to about 90%. Industry sources said that company plans call for the gradual development of the Vietnam facility into a regional production center.

KYMCO's Global Deployment
Subsidiaries	Business Scope	KYMCO Shareholding
Changzhou Kwang Yang	PTW manufacturing, Chinese operations center	50%
Changzhou Kwang Hsing	Engine parts production	100%
Hunan Kwang Yang	PTW manufacturing	94.5%
Hunan Kwang Yang Precision Machinery	Engine parts production	100%
KYMCO Vietnam	PTW manufacturing, ASEAN operations center	90%
KYMCO Indonesia	PTW manufacturing	85%
KYMCO U.S.A.	PTW sales	50%
KYMCO Philippines	PTW sales	100%
KYMCO UK	PTW sales	100%
KYMCO Luxemburg	PTW sales	50%
Source: KYMCO