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Major Chinese Automaker to Build $200M Plant for EcoMotors Engines

The joint venture with the FAW subsidiary will produce 100,000 "green" engines per year.

Courtesy: EcoMotors

EcoMotors has struck a manufacturing deal with one of China’s largest automakers to crank out the Michigan company’s energy-efficient combustion engine.

The engine subsidiary of FAW Group, a state-owned company formerly known as First Automobile Works, will invest $200 million to build a new plant in Jinzhong City capable of producing 100,000 of the so-called “opposed piston, opposed cylinder” engines each year, the companies announced on Tuesday. Production is expected to begin in 2015.

EcoMotors, backed by Khosla Ventures, Bill Gates and Braemar Energy Ventures, will hold 49 percent of the joint venture. While it is expected that FAW will use the engines for its vehicles, the nonexclusive deal allows EcoMotors to sell to other customers as well. Profits will be split between the parties, but additional financial terms of the deal weren’t disclosed.

“It’s a very critical step toward reaching commercialization and manufacturing capacity, and addressing an important need in China,” said Andrew Chung, a Khosla partner and EcoMotors board member.

The key advance of the the company’s “opoc” engine is that the pistons inject fuel into two separate chambers, instead of the usual one, making more efficient use of the movement. It means the engine can be half the size and weight, as much as 30 percent less expensive and up to 20 percent more fuel efficient.

While the engines are ideal for cars, they can also be used for generators and other purposes. And they can be engineered to run on gasoline, diesel or biofuel.

The six-year-old company has raised more than $66 million to date, but its engines still haven’t reached the market.

Tuesday’s announcement with one of China’s “Big Four” automakers is the company’s second notable manufacturing deal in the nation. Last spring, EcoMotors unveiled a $200 million deal with Zhongding Power to construct a plant in Anhui Province. Chung said that factory, which is expected to produce 150,000 engines each year, should begin production late this year or early next.

Both of the manufacturers sell primarily within China, the world’s largest market for automobiles. Given the deep appetite for cheaper engines as well as means of reducing greenhouse gas and other pollution, the nation could represent the ideal launch market for the business.

Of course, EcoMotors isn’t the only company making strides in this space, with Grail Engine Technologies, Achates Power and others also working to reinvent the combustion engine. Meanwhile, the company’s other flank is exposed to electric vehicles, which are far more energy efficient but also more expensive.

Chung said that there are multiple approaches for multiple markets required along the path to more sustainable energy systems.

“The engine isn’t going to go away tomorrow or in the next decade,” he said. “The need to solve that environmental problem is still critical, especially in China or India or emerging countries.”

Update: This story has been updated to reflect that a subsidiary of FAW Group, not the parent company itself, agreed to invest in the plant.

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