Distinguished investors, dear friends, good morning. Welcome to the Weichai Power 2021 Annual Performance Conference. First of all, I would like to introduce the management of the company who attend this conference. They are Mr. Tan Xuguang, the Chairman and CEO of Weichai Power. Mr. Zhang Quan, Director and Executive CEO of Weichai Power. Ms. Jiang Yan, Independent Director of the board. Mr. Chen Wenmiao, the Executive President of Weichai Power. Ms. Xu Hongkun, the Chief Financial Officer. Mr. Liu Tonggang, the Secretary of the Board of Directors. Among of which, Ms. Jiang Yan will attend the meeting through the online webinars. The company disclosed the announcement of the performance on March 25th and solicited investors' questions, release the annual results on the evening of the 30th. In order to improve the efficiency of the meeting, this meeting directly enter into the Q&A session.
Before the meeting, first of all, we would like to inform you the way of raising of questions. You can raise up your hand online or leave a message in the comment area of the live stream. Now let's welcome the first question. Let's welcome Yin Xinchi from CITIC Securities to ask the questions.
I'm very honored to be the first to ask the question. I want to ask that over the past year, actually, we had a very bad situation, but our company had very good performance. Could you share with us in this year what's your expectations, what's your performance, and what's the macro situation of the industry?
Okay. Thank you. Thank you for your question. In the year 2021, our company realized a revenue of CNY 200 billion with a year-on-year growth of 3%, and upper steel revenue with year-on-year growth of 0.3%.
In this economic situation, which was not satisfactory, we kept a high-quality development, especially the first half of the last year. China's heavy-duty truck surge had a very good performance. In the second half of last year, we had a heavy downturn, and it's mainly actually impacted by the transformation from China V to China VI. In this year, the industry's prediction is a quarterly slow of 220,000 units. This is just the projection. Year-on-year growth compared with last year, it's actually decreased by about 60%. But actually, when we look at the comparison with the same time of last year, actually Q1 compared with Q4 growth by 36%, compared with the previous and the rest of quarters, we can see the recovery. The Shaanxi Auto heavy truck, on March, it grew by 50% compared with February.
It's because the Shaanxi Auto heavy truck, actually in the previous month, it was heavily impacted by the COVID-19, which the manufacturing. Now for Weichai Power's heavy-duty truck engines, we can see in March compared with February, the growth is about 76% compared with the previous month. Among the whole industry, the growth average is like this. According to my understanding, the heavy-duty truck industry, after experience of the downturn of January and February, started from March. Especially in the first and the second 10 days of March, we had a very good performance. But over the past few days, because of the outbreaks of local pandemic, local outbreaks. We can see we can have some slowdown, and this is about the sharing from my side. Thank you for your question.
Okay. Thank you very much. Thank you management team for your answer.
Now let's welcome the next investor, Jenn Fei from UBS.
Mr. Tan, all the leaders, dear insiders, good morning. I want to ask, just now you mentioned about the change of the COVID-19 as well as the fluctuation of the oil prices as well as some other impacts. I want to know that among all of this, the war between Russia and Ukraine, what's the impact to our company?
Actually, this war between Russia and Ukraine, currently it hasn't hit our country severely. When we look at the whole year situation, it will have a large impact. Especially for the growth of the energy price. Because the upstream price has grown a lot, and now this hasn't been transferred to our industry and our company yet. We can see in the bottom level, the price actually impacted by the transformation to National V standard.
We have been hitting in terms of the sales. According to my understanding, for the whole world, for the industry, I believe that this war will have a large impact on us. We must tell you, the economic downturn as well as the war of the two countries, actually it's a double-edged sword, and it will actually facilitate the restructuring of the company. You all know that this round, we had a very good regulation, and for overseas markets, we had very good performance in European and American countries. For the exports, we have a strong demand requiring for our products. For supply chain and chips, actually, they do have some impact on our supply chain and chips, and it's actually heavily impacted the finished vehicle industry and not that much to the engine producers and manufacturers.
Okay. Thank you. Thank you for the answer.
Next, we would like to welcome Shen Zhenhao from CICC.
Sorry, my name is Chen Zhenhao. Can you hear me?
Yes.
Sorry. My name is Chen Zhenhao, not Shen Zhenhao. My name got wrong. I have a question for you. You know that the dual carbon target, these kinds of policies have been released consecutively. At national level, we have some change of the policy, and for the quota system of commercial vehicles as well as the hydrogen power policies, how will this impact your industry and your company? Now, as well as the development prospects of the traditional energy and the new energy in the future, could you share with us?
I would like to share with you a few words. In the Two Sessions of NPC and CPPCC this year, President Xi made some statement. Actually, this is not confidential.
Missions that for the Dual Carbon target as well as the new energy, we need to act according to the real situation, and we cannot be too aggressive. We need to be grounded and take a prudent attitude. For the past years, new energy industry was very popular. It was very popular, so a lot of companies actually flashed into this industry. For the new energy finished vehicle, especially for the passenger vehicle, they will experience an overcapacity in the future, which is disastrous. This is not from nowhere, and this is actually mentioned under my serious consideration. For the new energy vehicle, lots of companies actually are speculating and utilizing the capital market to gain more wealth. The capital market actually now have a non-ordered flourish of the new energy. We have lots of investors. You are the expert of the capital market.
I know you are all very clear about this. We know that for me, I seldom participate the road shows or events of the new energy, because we must take a reasonable attitude towards this topic. For fossil fuels, I would like to say, in terms of the commercial vehicle, especially heavy-duty commercial vehicle and the non-road, like the engineer machinery as well as the ship power equipment, agricultural machinery. In short term, it is actually not highly possible to be replaced by new energy. A lot of scientists, they actually are not responsible for their words. They just do it for the purpose of making profit. I think this haven't been defined quite clearly by the central government. With the coming of new energy, it actually brings some momentum, and it drives the technology innovation of the traditional energy to lower the energy consumption, improve the efficiency.
Actually, it also plays a very important role in improving the traditional energy. So the energy structure are diversified. Thus, it is about a direction of the future. We cannot only depend on the fossil fuels in different countries, different regions. We need to act according to the local situation, and different regions will form a different combination of energies. It is not a war against another thing. I've been told to you for several times that some people said that we need to totally replace the fossil fuels with new energy.
Actually, in the new energy for the upstream, is there enough supply for the metals?
Actually, I don't think it is highly possible. We need to take a reasonable view with that. In new energy, there are also different compositions. For example, the fuel cells, the power batteries. There is also some limit, especially including its charging source.
Different country actually have different situations, including the developed and deployed new energy battery field. We all got this about the future layout of this. We've already get this before of this year. We don't want to talk a lot about the concept, but I would like to say we are the only one of its kind in the whole world with a maximum capacity of over 20,000 units, and we are the only one of its kind which have run 30,000 km trial without experiencing any energy deterioration. We are the only one of its kind, having a very comprehensive concept in the value chain, including the air compressor, fuel cell stack, motor, electronic controls. We are also the strategic shareholders of Ballard Power Systems, and we also took over some Germany companies, and they established a joint venture in Weifang.
So we have a layout in the whole industrial chain, and this is what we prepare for the future five, or even 10 years. At the same time, for fuel cell, we got the only one of its kind, only one plate license. In the future, we will actually hold a series of major projects for the country, national level. The passenger car in terms of this regard will change a lot, but it will not have a complete change.
In Middle East area, is it possible for them to totally use new energy?
I don't think it is highly possible. So this is just a discussion about the current situation of the new energy. We can see that new energy is developing into a more reasonable level. Thank you for your question.
Thank you, Mr. Tan, for your answer. You can actually raise up your hand to ask a question. You can also leave a comment in the chat box at the live stream. I also would like to welcome Chen Sizhu from TranzSun Securities to raise up the question.
Hello. Good morning, Mr. Tan. My name is Chen Sizhu from TranzSun Securities. I actually have a question about the heavy-duty truck downturn. Last year, we saw heavy growth in our sales. Agriculture machinery actually as a very important part of non-road activities, a very important role. For the realization with the Lovol, what kind of synergy it can bring to Weichai Power?
It is a very good question. We would like to also learn from you. We need to learn from each other. Heavy research about the logic behind that in 2005, but we took over a company, Torch.
Weichai Power has a pillar of heavy-duty truck. After that, we had a powertrain module, and then we go to global to restructure and diversified our business structure and introduce the smart logistics modules, as well as the Linde Hydraulics and large bore high-speed engines. We also restructured the Sinotruk to have a very comprehensive layout in the commercial vehicles. We also realized Lovol, because I have been interested in this one for five years. We have done a lot of research. This is the largest agriculture machinery company in China. I would like to give you a brief introduction about this. General Secretary Xi has mentioned the revitalization of the usual areas need to be empowered by technology, and the agriculture machinery in China, world-seeking, actually are Achilles' heel at math. This is my conclusion.
They have very low added value, high subsidy, and large horsepower. Most of the high-level machinery depends on import. Over the past years, we have a layout, an arrangement of the agriculture machinery engine, and all the platform have been upgraded. After that, the preparation, we raise up these requirements. We would like to work together with Lovol, and we rename it to Weichai Lovol Smart Agriculture. We not only work on technology to make sure their agriculture machinery have its own proprietary power system. Also, at the same time, it brings a large demand to Weichai Power to release capacity. In agriculture machinery, Weichai Power largely improved its market share in the whole country last year. We actually provide Lovol with 24,000 engine unit. But we do not work on low value-added products. We predict that this year we would like to provide 60,000 units of engines to Lovol.
It also drives Weichai's development in only push the agricultural machinery group to push it to medium and a high level, especially for the transmission, at which innovation will actually be largely used in all the agricultural machinery. At the same time, it brings a large market to Weichai Power. This is a huge market. If you are not familiar with it, but in the future, I think that our estimate is the market size will be over CNY 50 billion.
Okay. Thank you for your answer.
Next question from Chen Zhongyang of Huatai Securities. Welcome.
Thank you. Good morning, Mr. Tan, management team. I have a question about hydraulic. We know that the excavator hydraulic power system of the low excavators have completely replaced the import and has been sold in large quantities.
So can you share with us the relevant information about the market size, the future prospect, as well as the plan of Weichai Power?
For that question, actually, it's very important. Like to show you that for excavators, last year, we sold over 300,000 units. Even against the downturns of last year, it's like 330,000. Over 20 tons unit account for 45%. For the hydraulic system with over 20 tons, actually, it's totally dependent on import engines, totally dependent on import. There is no excavator company have their own proprietary hydraulic power equipment. So we actually tell this, that is, if you get hydraulic, you will get it all. We took 10 years to finish this deployment. Last year, we had a large pilot. I'd like to share with you three numbers. The first is the efficiency, improved by 10%.
This is about our hydraulic power system. Fuel economy, fuel consumption lowered by 15% to 11%, and the noise dropped by 2 dB. This is actually very important because you can feel clearly about the noise level. For this market, why Weichai Power can achieve this? Weichai Power actually have our own engine, as well as electronic control and hydraulic power system. For China, every company, their engines, if they purchase from other company, or they purchase the hydraulic system from another company, and they cannot do the electronic control, they cannot share data, they cannot improve the efficiency. Their data cannot be collected and shared because all of them, they actually have some conflict of interest in collecting data. But Weichai can do all of this. The number of 300,000 units, and normalized, we have the number of 250,000- 300,000 units.
Also, we have a large amount of excavators exported. So we hope in the future five years, we can realize a 20% or even higher market share. The final result will not be which finished vehicle brand, but it depends on which hydraulic power system can bring lower fuel cons-- higher fuel efficiency, lower noise to the client in this way. That's what matters. In the Shandong Heavy Industry Group, we have two brands. Shantui produced over 10,000 units last year, and Lovol produced 10,000 units. So totally, they produced about nearly 20,000 units. For us, we can see we have a differentiation market, which is our competitive edge, and for Weichai Power. When we work on heavy duty engines, we are not a closed one.
We like to share, and we open it to Sinotruk, SANY, and other companies, provide them with the hydraulic power trim, and to make sure we can work together to surpass the international brand. But if they don't use it, then our excavators will actually accelerate it to quickly acquire more market share in the future.
Thank you. I'd like to welcome the next investor, Fang Chen from HSBC, please raise the first question.
Thank you. My name is Fang Chen from HSBC. I have one question for the management. I noticed the sales of large diameter engines grew 49% YoY in 2021, which is quite remarkable. So I was wondering, what is the future plan for this product? Can we have a little bit instruction of this? Thank you.
As the performance of high speed and high-end engines, large diameter engines develop very fast.
What is our next step plan of Weichai Power? Thank you for asking this question. You know that in 2009, we took over Moteurs Baudouin, a French company about high-speed, large diameter engines. We are waiting for today to come, actually. I would like to share with you some points. For the large -bore, large diameter engines with over 500 kW, with the 40 years reform and development for the electric power generation, as well as some drilling platform or mining truck, or big data center, database center. Actually, we had a bottleneck, and by the companies in the U.S., like Cummins, Perkins, MTU, we rely on their product, and the overall market size is about $30 billion. We heavily depend on import.
In other words, the first 10 years development China among in the 500 kW- 1,000 kW large diameter engines, we have actually already realized the local production. Actually, this is the total replacement of international brand. Also, this has been already sold in large amount of market. Especially now, we have the unilateral trade war, and we actually have some limits of international brand coming to China. For the big data center, they are forcing the proprietary and local brand. We can see that we actually had a sales of 5,000 units, and next year we will reach 10,000 of this kind of engines unit. We have already invested in the capacity of 20,000 units. We hope by 2025, before 2025, we would like to make sure we can gain 15% of the global market share.
The overall market is about $30 billion, and the 15%, you can do the math. For the large diameter engines for Caterpillar, Cummins, as well as MTU, actually, these are their main product portfolio. This will bring a large push to the profitability to Weichai Power, if we achieve this.
Thank you for the answer.
Next question, we would like to welcome Liu Ping from Hualin Securities.
Thank you. Mr. Tan, we understand that because of the international situation and COVID-19, there is a great resistance to the import of high-end engines. Can Weichai have the opportunity to completely replace the imported engines to acquire larger market share?
The high-end engine, you mean actually, according to my understanding, it is mainly about the engineering machinery engine.
For engineering machinery- With the large equipment over 20 x, they actually totally depend on importing from 20x to 30 x. Actually, under 30 x, some engines are produced by the joint venture in China, but they use actually imported compound materials. During the pandemic, it is very hard to receive the import from Europe, and we replaced it by the large-scale diesel engines, high-end and low load, produced by Weichai Power. Actually, its market size is about 250,000. This is a very high threshold market with very high growth profit. I think this is another opportunity for growth for Weichai Power. The 25,000 units market size, we are taking these shares step by step. I think that this is actually bringing a lot of opportunities to us at the same time.
No matter for XCMG or SANY or Zoomlion, and some other companies, after using our products, the system is not necessarily to depend on import. In Chinese market, even based on promotion, we can still gain a very high profit. That's what it is.
Okay, thank you for the answer.
You can raise up your hand to ask question, and also leave a comment in the chat room. Next, I would like to welcome Xu Mingchang from Guangfa Securities to raise up his question.
Okay. Hello, Mr. Tan, and all the management team. Good morning. We know that last year the performance of commercial vehicle export was very good, and will also grow by 30% in terms of the export. Could you give us a breakdown of the export, and could you also give us a forecast of the future export business?
Okay. For Weichai Power's engine business export, it grew very fast. Just like what I just mentioned about the high-end. High-end is not only used in China, but it is replacing the international market largely, including the global OEM of top 15. We've already supplied to the top 10 of the top 15. Last year, the amount was about 35,000, with a growth rate of 50%-60%. This year, we will double that, reaching 80,000 to 100,000. So we are stretching for 100,000. For the whole route, middle and large size diesel engines export, this is actually a game changer. For the Shaanxi Heavy Duty Automobile, last year, we also had a very good performance at 72% of the growth, including the Sinotruk. Especially recently, the Sinotruk actually export over 6,000 units every month and keep a stable growth. So what's the reason of that?
About the growth of export and for the heavy truck as well as the heavy engine, it's actually related to the energy surcharge, the supply and demand, as well as a large amount of development and the investigation. It's also heavily impacted by the shipping industry. But for the rest, we are okay. Maybe we are influenced by the above factors. For the rest, for example, the capacity, there is no problem. We can guarantee this capacity. The capacity is like this as a whole group. Actually, in terms of the sales revenue, export business account for 8%-10% of the overall revenue. We hope our export will count for 15%-20% of the overall sales revenue in the few years. This is my answer. Thank you.
Thank you, Mr. Tan, for your sharing.
Next, we would like to welcome Dai Chang from the Industrial Securities.
Thank you, moderator. My question is, when we look at the annual report, the overseas enterprise grew very strongly last year. For example, the revenue and the profit of KION was very promising. So please show us the reason of the strong growth of overseas enterprise as well as your forecast of the year 2022.
Thank you for your question. Last year, the overseas industry. Just now, I shared about the share of our exported product, which account for 20%. For the overseas company, it grew very fast last year. Actually, there was a downturn in 2020, so it's actually a rebound. Last year, and for the growth of overseas company last year, it actually, in 2020, its contribution is 36%, but in 2021 was 46%.
It is actually a civil growth and it is very balanced. There is a word, you will have a highlight here or there. If not here, maybe in other parts, you will have very good performance. I think that is a very good performance. For example, in Asia -Pacific and American market. In Jinan, we invest in the forklift manufacture facilities in Jinan of the KION. In this, we were actually helpful with the new energy forklift for KION to improve its competition in Europe and the America to lower its cost. Also, Linde Hydraulics. Linde Hydraulics, as I just reported, we have already started with that. Last year is about CNY 2.2 billion, and this year it will be double. For Linde Hydraulics in China, I believe that you have already noticed our financial report. You have already received that.
I think that this is the second Hongli will be showcased among the investors, but this one was actually powered by Weichai. Because we have our own proprietary power hydraulic system, its competitiveness is even higher. It will run even faster. Its gross profits will also be improved with this kind of integrated portfolio. For the overseas business, we took over overseas company, then we realized a localization and also send the product overseas to get more profit. I think we are having very good performance .
Okay, thank you to management.
Next question, would like to welcome Yang Xianyu from China Merchants Securities to ask the question.
Mr. Tan, management team, good morning. I would like to ask you the question that is, now you also are the Chairman of the Sinotruk as well as the Shaanxi Auto Heavy Truck.
How do you view or position these two companies? How do you balance them?
For the heavy-duty truck, no doubt, we are the number one in the whole world. But we never said that before. After we took over, work together with Shaanxi Auto Heavy Truck and Sinotruk. Actually, we have the largest share in the whole world. Last year's number was 450,000 units, and this year looks up to be 500,000 units. At the same time, in terms of the heavy-duty truck, the export account for about 60%-70%, or about 70% or 80%. The main brand exported are the Shaanxi Auto Heavy Truck and Sinotruk. These actually hold the export network resources of the heavy truck from China to other countries. We have very large share, which is astonishing. For these two companies, I am the Chairman of the two of them.
I don't think I will be chairman forever because I will also have a day of retiring. But now I would like to resolve the issue that is how to turn these two companies from a passively competition status to a initiative cooperation status. Because actually, Sinotruk, their truck use the traditional engine, and HOWO, heavy- truck company, the Asia company, they need to use the Weichai Power engine compulsory. They have both competition and cooperation, so we don't want it a zero-sum game. Strategically arranged by us, these two companies had very good cooperation recently, and they both can gain the interest and shares respectively.
Okay, thank you. Thank you for answering.
Next, we would like to welcome Fei Fang from Goldman Sachs to ask the question.
Thank you for the opportunity.
Can you talk a little bit about R&D and how this will impact the shareholders' returns, such as dividend? Research and development expenses of Weichai Power continues to increase. Does it have any impact on shareholders' returns, like dividend?
This is a very good question. Actually, there are two parts of it. The first one is about the continuous growth of research and development expenses, and actually it definitely will impact the profit currently. But actually, the ROI of R&D. What is this number? This is the method. If a company cannot realize the importance of an R&D, this company will not survive in the market. We can see in the whole world, we work with international companies.
Now our engine business research and development speed have been continuously improved, which reflects and supports us to push us to the top level of the amount of peers in the whole world. So in terms of R&D, we will continue to grow the R&D investment in the future. The second point is that for the R&D investment and expenses, after we enlarge this, we still can keep a growth of our profit. This is very important. It does not mean that we increase investment in R&D, our profit will drop. Even last year, we had such a challenge with also an increase of R&D by CNY 800 million. We still had a growth of the profit. So I think in this regard, it will not impact the returns to the shareholders.
Okay, thank you.
You can raise up your question by raising up your hand. You can also leave a message in the chat room. Next question, I would like to welcome Li Hengguang of Northeast Securities.
My question is about the dividend policy change in the future, and we have very good team and had a very good return to the shareholders. But last year, we had a lot of change in the macro environment and industry. So in terms of the incentive policies, will your company have some change in the future? As well as, will you consider the new equity incentive?
It is a very good question. Our commitment to the capital market have been well honored in the past. In the future, our dividend percentage will be higher, which is very important. Will be not lower, will be higher than 30%.
When we come all along the way, a lot of our management team acquire shares, and our top talents actually also hold shares of our company, and they are on the same boat with us. Last year, we predicted to actually provide equity incentives to our young management team, middle-level management team, who are mainly the leaders or management of post the 1980s.
Okay, thank you for your answer.
Next, we will have to welcome Chen Qingping from Gaoli Assets as the customer.
Thank you, Mr. Tan. Good morning. We noticed that this year in January, our own diesel engines, its thermal efficiency has reached some peak and created a record. We continuously improve the thermal efficiency of the diesel engine. What is benefit to the market?
Okay, thank you for asking this technical question. For this question, actually, it is like this.
For the thermal efficiency improvement, this is actually a pursuit of the internal combustion engines of the whole world over the past century. 50% of the thermal efficiency, it means that the record of 100 meters running getting to less than 10 seconds. If it is reaching 51% of the thermal efficiency, it means the running record of 100 meters is decreased to nine seconds. We have internal, external thermal efficiency, and when we talk about the technology, we can predict that the internal, external technology combined together, the thermal efficiency will reach 55%-60%. That means actually, it can be paralleled with the power fuel cell, especially in the tractors. Actually, it can compete with that. At the time, it is very easy. If you drive 1,000 km, how many fuels you can save? How much money you can save? That is very direct.
I think it is over 30%, and this number will be even higher. Weichai is continuing to work on that technology about the thermal efficiencies, the benefit brought by the thermal efficiency. Our country also have the policy of the energy saving and emission reduction. Actually, thermal efficiency is very important of that. Now for the equipment, we still have 500,000 of National China III, and also a large amount of China IV product, and we will update these very soon to lower the emission. To also help us to realize this goal.
Okay, thank you, Mr. Tan, for the answer.
Next, I would like to welcome the next investor from Tianyi, from the Dongfang Rental Asset Management.
Okay, thank you. We know that Weichai's business sector is very complex, so could you help us to sort it out?
Okay. I would like to share with you that, because as analysts, you actually change your position quite frequently, so there are not some very high consistency in your position. So I would like to share with you, actually, we have very clear business portfolio. The first one of our business is about powertrain system. Firstly, this is about the heavy-duty trucks power system. Secondly, we have already entered into the market, which is about the hydraulic power system. You can do the math. 300,000 units of excavators as well as other equipments besides excavator, account for 50% of the shares, and its value is much higher than the powertrain of high heavy-duty vehicles. The next one is a CVT powertrain. Internationally speaking, we are actually trying to make it lower than 300 horsepower.
When we work on CVT, a very easy logic is for the transmission technology. For this, actually, we already have the proprietary on a technology about the progressive transmission. We actually also have a large cost benefit. For the progressive transmission, the CVT progressive transmission will become a must-choose technical route. This is about our powertrain system and power system. Actually, this is the core of all the rest, and it is also about the core of our percentage profitability. The second one is about the commercial vehicle, and actually, we have also the Shaanxi Auto as well as Sinotruk. Combined, we are having the largest share. We want to become not only the number one in terms of numbers, but also we also reserve a whole system, whole family commercial vehicles.
Not only with heavy-duty truck, we also have the middle-duty, light-duty truck. Also we have another business module of the light-duty commercial vehicles, like a pickup as well as some other varieties. Thus, with the support of a strong power system, we will largely improve our business quickly. Next is the smart logistics business, is mainly about the overseas layout with KION and Dematic. In that way, we resolve the situation that is designed by China's customer requirements. How the overseas companies meet the Chinese clients' requirements. Now they have some localization, for example, in Jinan. Then we have the new technology, agriculture machinery. We do not only sell agriculture machinery, we have actually a concept of smart agriculture, autonomous driving machinery, about breeding, harvesting, et cetera, every year with the revenue of CNY 1 trillion .
We would like to build a new business environment and ecology. For smart logistics, with market size of CNY 10 trillion every year, we are building technology and build a team of 500 people to further penetrate and dig the values of the logistics industry to try to give returns to our shareholders and clients. In these aspects, we hope you can pay more attention. Also, within this year, Weichai Power as well as we also have two new modules, which is actually currently confidential. Please look forward to it. All the things that I do, the purpose is the intention, as well as our priority is about the powertrain, power system. Based on this, we have a further diversification around this.
Thank you, Mr. Tan. Thank you, management team, for the answer.
Thank you for the answer from the management team, now we will have the next question.
Mr. Tan and management team, I am Dong Bingtao. My question is about, actually last year, the raw materials grow very fast. Also, we have the transformation to China VI. Also we have a price pressure. Now is it possible for us to transfer the growth of the cost to our suppliers or clients? Last year, we can see the impact by the price of raw materials. What is the impact to the gross profit, and what is the percentage of the impact to the gross profit? If we look into the future, the gross profit, the trend in the future, will it have a room for improvement in the future?
For a question. I have a few answers first about we have released the annual report.
For that question, actually, it is about management. You can look at the performance, the operation of the company through the annual report of this company. Last year, actually, this has not heavily impacted Weichai Power, because we have a large volume. So we have actually a very high price bargaining power. Our current vendors, it is very hard for them to raise up the price to us. It actually impacted Sinotruk and Shaanxi Heavy Duty Automobile, and for other companies in our group last year, our procurement costs are lower by 55%. So we have not been influenced by that. That is also a reason why we had such good performance, especially for the finished vehicle companies in the middle link. We actually are a seller's market. We are actually a buyer's market, and their gross profit was impacted for some finished vehicle companies.
But for the engine manufacturers, we haven't been influenced a lot. Now we have time for the last two questions.
Thank you for the answer.
Now let's welcome the next question. There are no more questions. Tan Xuguang.
Mr. Tan, can you hear me? I have a follow-up question. Just now you talked about the smart intelligence. Now, we also focus on the scenario of the intelligence of the commercial vehicle in the different scenarios like industrial parks and ports. A lot of competitors are having arrangements in this. So how do you look at the market trend and the future rhythm of the intelligence of commercial vehicles? And how it will impact our core business? What's the opportunity and challenges in terms of the intelligent commercial vehicles market industrial layout? What's your opinion?
You are now actually trying to persuade the commercial vehicle, and you talk about new energy, then you talk about intelligence driving. I think that autonomous driving is actually not grounded, because actually this is a hope to have unmanned driving. In certain environments and scenarios, this is doable. So what do we mean by the certain scenarios like ports? In the ports, we've already had a very complete and comprehensive arrangement and layout, and they will like to totally replace it. So unmanned driving is actually highly cost. In what scenario can we use the unmanned driving firstly? For example, mining truck in the mine, ores. For example, if we have 100 truck fleet, 100 drivers, now we can actually have one-third of those trucks replaced by unmanned truck and use less than one-third of the drivers. And this can help the mines lower the cost.
Another one, which is highly popular is about agriculture machinery, especially in the Northeast China. It's quite also realized, the smart autonomous driving agriculture machinery. Some people think that autonomous driving, some people say, L1, L2 are okay, but L3, L4, I don't think it's possible currently. And you give a lot of prospects, and this is actually a lot of companies trying to gain some profit from the investors. As analysts, you give a very high permission, gain a lot of benefits, then some company will just leave. So please don't buy that. I want to say it's time to open up to pressure. What's your plan and the future arrangement of the Shaanxi Auto Heavy Truck? Shaanxi Auto Heavy Truck last year had a loss about CNY 700 million . This January and February, this year it also experienced a loss.
But I think that the whole group actually have a strong momentum of profitability as the strong profitability actually offsets this of the Shaanxi Auto Heavy Truck. I believe that in Q2 of this year, they will make breakeven and begin to gain profit. For the Shaanxi Auto Heavy Truck, and in the whole country, we actually had a good foundation and also a good development in exporting product. For this company, I don't think there is a big problem for them. But for Shaanxi Auto Heavy Truck especially, and also for Sinotruk, now we are proceeding the Shaanxi Auto Heavy Truck to have a synergy with Sinotruk's market, and then that way it will largely drive the finished vehicle business as well. Thank you.
Thank you.
Thank you all the investors for your questions, and if you have any questions, please contact us afterwards. It's actually a rare opportunity, a very precious opportunity to meet all of you here. Thank you.
Thank you for the sharing, and thank you all the investors for your participation. Here is the end of today's press conference, performance conference, and thank you very much