France-based Schneider Electric, one of the world's leading providers of power distribution and industrial control solutions, signed a framework agreement yesterday with Delixi Group for strategic cooperation in a new joint venture in Wenzhou, East China's Zhejiang Province.
Liu Changsheng, vice-president of the China Quality Certification Center told China Daily the cooperation so far is the biggest of its kind by scale and investment in China's power industry.
According to Jean-Pascal Tricoire, chairman and chief executive officer of Schneider Electric global, China is his company's third largest market.
"I believe in two years China will be our second biggest market, surpassing France, and only behind the United States," he said.
The China market now contributes 8 percent of the total global turnover for Schneider Electric.
The new venture, named Delixi Electric Ltd, which will be incorporated in Wenzhou, is dedicated to the manufacturing, marketing and distribution of low voltage products. Operations will begin once certain conditions and regulatory approvals are met.
The products will be manufactured and sold under the Delixi brand and distributed by its network of 1,500 dealerships around the nation.
Both sides, however, declined to disclose investment details.
"We will reveal the figures after the registration of the facility," said Hu Chengzhong, president of Delixi Group.
The joint venture is expected to achieve an annual revenue of about 2.26 billion yuan (US$282.5 million) on a full year basis, with a profit margin (after tax) of approximately 10 percent.
"This joint venture will benefit from Schneider Electric's leading technical and management support and from Delixi's brand image and local roots.
"The complementary relationship between a domestic and a world-renowned enterprise will create new opportunities, contribute to the development of the Delixi brand, and propel our internationalization efforts further," Hu said.
"This transaction represents a major milestone in the development of the electrical industry in China," he added.
Russell Stocker, executive vice- president of Schneider Electric Asia Pacific Operating Division said: "This new partnership will inaugurate a new business model for Schneider Electric which will add to its existing approach to prescriptions, services and solutions.
"Indeed, Delixi Electric will market independently a very competitive offer of low voltage products, through a specific large network of retail outlets. It will offer a different value proposition from Schneider Electric with a distinct market approach."
Delixi Group is one of the local leaders in the Chinese electrical distribution field employing about 14,000 people across China. It recorded sales of 12.8 billion yuan (US$1.62 billion) last year.
(China Daily December 18, 2006)