EcoMotors CEO Talks $200M Deal With Chinese Manufacturer

4/15/13Follow @XconomyDET

Last week, Allen Park, MI-based EcoMotors announced a $200 million deal with China’s Zhongding Power to build a manufacturing plant in Anhui Province. The plant will produce EcoMotors’ opposed piston opposed cylinder (“opoc”) engines, which the company says are cheaper to manufacture and will deliver up to 60 percent greater fuel efficiency than conventional engines at half the size and weight. It’s the world’s first opoc plant.

Don Runkle, EcoMotors’ CEO, calls the deal a good next step, and one that has been in motion essentially since the company signed a letter of intent with Zhongding in 2010. Zhongding, one of the biggest producers of automotive components in China, will finance and build the plant, which will have the capacity to manufacture about 150,000 engines per year—generating a potential $1 billion in revenue, Runkle notes.

“China is a big target for us,” Runkle says. “It’s the most rapidly growing engine market in the world, and they’re aggressively looking at new technology rather than copying existing technology in the United States or Europe.”

Runkle says EcoMotors will receive a portion of the engines manufactured in China to sell to its other customers with no “cap back,” meaning EcoMotors won’t have to pay Zhongding for those engines. Zhongding benefits because the total number of engines being manufactured adds volume at the new plant. Zhongding plans to supply opoc engines to its own set of customers across China.

Runkle says even though the manufacturing plant will be located in China, EcoMotors still plans to use Michigan suppliers. Part of the reason the plant is located in Anhui Province is because of “excellent” support from the Chinese government, he says.

Last week’s announcement is the latest piece of good news for EcoMotors, which closed a $32.5 million Series C round last summer. The round was led by New York-based Braemar Energy Ventures and joined by Bill Gates and Menlo Park, CA-based Khosla Ventures. Gates and Khosla had previously invested $23 million in EcoMotors during an earlier round of financing.

When asked why EcoMotors is flourishing while other cleantech ventures seem to struggle to stay alive, Runkle had this to say: “The key is lower cost. If you look at solar, wind, or batteries in general, those types of technology improve efficiency at a very dear price.”

Runkle adds that EcoMotors recently signed three additional letters of intent with companies he declined to name, though he did say two of them were “top 10″ Chinese companies. As for Navistar, the truck and engine company EcoMotors also has a contract with, Runkle says, “We continue to work with Navistar. Though they’ve fallen on hard times, we look to continue with them as they dig their way out.”

Sarah Schmid is the editor of Xconomy Detroit. You can reach her at 313-570-9823 or sschmid@xconomy.com. Follow @XconomyDET

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