International joint ventures

Conditions in the Chinese market for capital equipment have been very challenging for a number of years. Growth forecasts have been revised down significantly, and there is considerable capacity in the engineering sector.

We have been operating the DEUTZ Dalian joint venture – in which our Chinese production activities are concentrated – with the First Automotive Works Group, one of China’s leading vehicle manufacturers, since 2007. Here, we produce 3 to 8-litre diesel engines, mainly for automotive and industrial applications for the Chinese market. We will expand DEUTZ Dalian's product range from 2019, which is when the China IV emissions legislation comes into force. Local production ensures that we have the proximity to our customers that we need and enables us to seize market opportunities in various off-road applications.

In 2016, unit sales in the DEUTZ Dalian joint venture fell by 8.7 per cent to around 68,000 engines. Revenue declined by 10.8 per cent to €303.0 million. Adjusted for exchange rate effects, the decrease was 5.7 per cent. The company, accounted for under the equity method, had a negative impact of around €5.7 million (2015: €7.0 million) on the DEUTZ Group’s operating profit.

DEUTZ AGCO MOTORES S.A. (DAMSA) is our joint venture with the AGCO Group and is located in Argentina. It builds engines for the local market, mainly for agricultural machinery, buses and industrial applications. In 2016, DAMSA sold almost 1,000 engines. Revenue dropped by 24.9 per cent to €14.5 million as a result of negative exchange rate effects. However, measured in the local currency, revenue increased by 19.1 per cent. The company's operating profit came to €0.2  million (2015: €0.7 million).

We hold a stake of 30 per cent in D.D. Power Holdings (Pty) Ltd., our South African joint venture. This sales and service company is active in the local market, focusing on sectors such as the local mining business. In the year under review, the company reported revenue of €14.6 million (2015: €20.2 million) and a profit of €1.9 million (2015: €2.5 million).