Weg resists the pandemic in China, grows and reinvests – 01/03/2024 – Market

Since 2004 in China, now with factories in Nantong, Rugao, Changzhou and Jintan, the Brazilian group Weg has achieved an average annual growth of 15% in the last four years, “despite the difficulties caused by the pandemic”, says Eduardo de Nóbrega, managing director of operations in the country.

The objective for the coming years is to maintain this pace of compound annual growth rate (CAGR). “We will continue to invest, through increasing production capacity, such as the expansion of our Rugao factory, which is scheduled for completion in May 2024,” he says.

It should also invest in expanding the commercial network and portfolio of products made in China. The country represents 30% of the global electric motor market, a focus of Weg. “We couldn’t stop operating in this market”, says Nóbrega, even though it is “challenging, fragmented, with several local and global competitors”.

In addition to expanding its current structure, the company should begin integrating the Chinese units of the American Regal Rexnord in the middle of this year. The acquisition by Weg was announced three months ago and covers factories in other countries, including India, but still depends on authorizations.

The presence in China, says the executive, is important to “consolidate the strategic positioning in the Asia-Pacific region”, and for the partnership with global clients also with operations in the country.

The significance of China for Weg was highlighted in the choice of the new executive president last week. Alberto Yoshikazu Kuba, who takes over on April 1st, held Nóbrega’s position until 2019.

Factories in the country focus on the production of low, medium and high voltage and commercial electric motors, with the exception of the Jintan unit, dedicated to frequency inverters and low and medium voltage drives.

“Weg focused its main efforts on developing solutions for cargo and passenger vehicles, trucks and buses”, says Nóbrega, but “has always been very attentive to market movements”.

It is a reference to electric cars, an area experiencing great expansion in China. “Weg is not focusing its efforts on developing products for passenger vehicles, but we continue to monitor this segment and act on specific opportunities in which our products and solutions are competitive.”

In his opinion, “electric motorization seems to be a path of no return, in which we will see great advances, both in the electric traction technology itself and in the batteries”. He recalls that the company already produces vehicle battery chargers, widely used in Brazil.

Asked about recent regulatory resistance in the US and Europe, aimed at containing Chinese electric cars in their markets, he assesses that “the world may face sporadic difficulties during this journey, some caused by geopolitical issues, but there should be no changes in trajectory” .

Asked about the possibility of the Brazilian company entering China’s own electric vehicle supply chains, Chinese financial analyst TP Huang, who specializes in the sector, said that automakers like BYD “are very vertically integrated and produce internally.”

And at least until now, “when they go outside of China, their supply chain only uses Europeans, Japanese and Americans.” For the factories that BYD announced for Bahia, Huang believes, it is likely to include Chinese auto parts manufacturers.

In Brazil, in addition to investing in battery charging stations, the path for Weg also involves increasing renewal of the bus fleet. The program is encouraged by BNDES, seeking a “new chapter of electric, ecological and sustainable public transport”, in the words of the bank’s president, Aloizio Mercadante.

“Our priority for electric traction has been the Brazilian passenger and cargo transport market”, says Nóbrega. “China, at this point, is not our target for that line.”

In general, the company today sees “a definitive and necessary movement in the search for reducing carbon emissions”, he says. “Electric traction should remain one of the main ones, but other options should emerge, such as combustion engines powered, for example, with hydrogen.”

It was one of the questions raised by Weg at the climate conference in Dubai, part of the company’s strategic sustainability vision. “Events like COP28 are opportunities in which we can show our commitment”, says the executive.

“Countries with a predominantly renewable energy matrix, such as Brazil, have the potential to lead the production of green hydrogen, and Weg has been working to serve this market, which is expected to grow a lot in the coming years.”

The objective is to offer a package of solutions, from engines to transformers and renewable generation solutions — solar, wind, hydro and biomass. In addition, the company has been working on its own operations to reduce carbon emissions by 50% by 2030.

Weg’s main product, electric motors, “contributes by nature to the reduction of emissions” and is undergoing new research and development efforts, targeting “high-efficiency axial flow” technology.

“This type of engine has a much better power-to-weight ratio than conventional induction engines, and is used both in the industrial area and in vehicle traction”, describes Nóbrega, who is an industrial engineer. “Initially, as it is a new technology, it should be produced in Brazil.”