China XD Plastics Company Ltd. of Harbin, China announced this week that it had acquired, through its subsidiary, Harbin Xinda Macromolecule Material Co. Ltd., land use rights to 50 prime acres and a construction project in South Harbin Industrial Park for $14.6 million USD. China XD said the deal came at a 20 percent discount below appraised market value due to imminent action by the Harbin government to repossess the property.
The land and its construction project had been the property of Harbin Shengtong Engineering Plastics Co. Ltd., which ran short of funds. The Harbin Development District helped to facilitate the transaction. Under the deal’s terms, China XD’s Harbin Xinda will pay $5.4 million within five business days, a further installment of $6.3 million by June 20, and a final payment of $2.9 million by October 30; payment of the final October note is contingent upon Shengtong’s seasonable completion of necessary title transfers to Harbin Xinda.
China XD CEO Jie Han said of the deal, “The signing of this land purchase agreement is a significant milestone for our long term growth strategy and a solid step towards achieving our capacity expansion plan. With this new asset in place, the Company will have a sufficiently expanded platform… to realize the resource integration, equipment upgrade, and steady capacity expansion needed to fully benefit from the rapid growth of modified plastics used in automotive applications including those in the alternative energy vehicles, a key element of our long-term strategy.”
Construction design and a new budget will be worked out by management of China XD for the property, which is to include a new plant and research facility. The plans are subject to board review and management expects to submit them for approval by the end of May.
China XD’s Harbin Xinda Macromolecule Material subsidiary develops and produces for sale modified plastics principally for the automotive industry. The plastics are used “in the exterior and interior trim and in the functional components of more than 60 automobile brands manufactured in China, including Audi, Red Flag, Volkswagen and Mazda,” according to a company press release. Several Chinese auto brands also use the plastics, notes the company website, with 177 products certified for use by one or more of China’s automobile manufacturers. In its research and development efforts, the company relies heavily on academic researchers.
China XD is keenly focused on the electric vehicle (EV) market. To that end, last year it entered into an exclusive product development agreement with Hafei Dongyang (HD), one of the country’s leading automotive parts suppliers in Northeast China, delivering an initial three tons of specialized plastic compounds to be used in battery casings during a pilot program for electric vehicles. As part of that deal, the company will have the opportunity to receive additional exclusive product development rights for a period of four more years upon the successful design of new specialized plastic products to be used in HD’s plastics parts in electric vehicles. Further, from time to time over the period, China XD will supply HD with specialized plastics for cell cases, separators, membranes, polymer super capacitors, composite bipolar plates, silicon wafer carriers, and plastics parts used in charging stations and other applications.
The Chinese Ministry of Science and Technology estimates that electric vehicles will account for at least 10% of total automobiles made in China by 2012 and 50% by 2030, an arithmetic growth of 19.5 million units per year. The government heavily backs EV development.
Mr. Han commented, “We believe the electric vehicle market presents a strong growth opportunity… to expand sales of high-value-added products in environmentally-friendly areas… We believe the underlying growth trends within the Chinese automotive market remain robust, and we remain confident in our ability to continue to deliver profitable growth.”
More on China XD can be found on the Company’s website at www.chinaxd.net