Beijing Olympics boost Oilon sales
Beijing Olympics boost Oilon sales
After two years of strong exporting, the Lahti-based manufacturer of burners, Oilon International Oy, decided to establish a production plant in China
Oilon International Oy has made a brisk start in its drive to take the Chinese market by storm. After two years of strong exporting, this Lahti-based manufacturer of burners decided to establish a production plant in China, with the aim of becoming the leader in its field in that country within ten years.
Sales are getting an extra fillip from the Olympics, to be held in Beijing in 2008. By that time Chinese authorities hope to put an end to the clouds of pollution that mar their city by investing in cleaner power production.
Oilon’s assembly plant in Wuxi, near Shanghai, started up in May 2002. It has a majority holding in Oilon Burners (Wuxi) Co. Ltd. alongside Finnfund and Hongkong-based Charter Technical Services Ltd., Oilon’s long-term business associate in the Far East.
“Finnfund’s investment help was important because we started several other new operations at the same time as our Chinese plant,” says managing director Eero Pekkola of Oilon International Oy. “Finnfund has been a good partner. It has clear goals and it knows how to groom companies to reach their own goals.”
Oilon has been selling industrial and process burners to China since the early 1990s. The country is already one of its most important market areas but the Wuxi assembly plant is expected to raise sales substantially in the years ahead.
The production unit at Wuxi specialises in manufacturing small oil and gas burners, mainly used by industry and power plants.
“In small-scale classes of burner, it’s a question of high volume and a large number of units,” Eero Pekkola explains. “This means that sales prices have to be lowered by reducing production costs.”
Production has got under way well since the start-up in autumn 2002, he says. The manufacturing unit’s equipment has been installed and 17 employees have received job training. In the initial stage of operations, most of the burner parts are being imported from Finland.
In future Oilon intends to increase the proportion of Chinese-made components. “It will save costs, and buying certain components from China will also reduce customs duties.”
Good service as well as equipment
Oilon’s objective is for the Wuxi plant to be making profits already in 2004, its second full year of operations. The company is boosting not only output but also its sales organization, by training new resellers and expanding its resale network into new regions of China.
“We have already set up training facilities for customers alongside the Wuxi plant,” Pekkola notes. “There is no such thing as a good product without these services.”
Another mark of Oilon’s customer-driven operations is that all main documents, from burner manuals to guidelines for resellers, are translated into Chinese.
“The competition in China is extremely tough. There are about 15 burner manufacturers in the market, mainly from Germany and Italy. Also local manufacturers are entering the field.”
Oilon remains confident that the Wuxi plant and the services being developed will guarantee its success in the Chinese market.
“The Chinese appreciate commitment and a presence in their market. Good training, spare parts, a technical help desk and product development that is tailored to Chinese needs ensure that we will find new markets in the country and expand our market share.”
The company also intends to export burners made in Wuxi to other Asian countries.
Beijing’s anti-pollution drive
Oilon is being helped towards its Chinese profit targets by the impending Olympic Games in Beijing. As part of the preparations, China’s capital is now trying to curb pollution. The main way of cutting emissions of sulphur, dust and carbon dioxide is to shift from coal to burning natural gas.
So far Oilon has sold industrial and power plant gas burners with a combined output of over 2000 megawatts to Beijing alone. That is equivalent to the capacity of two medium-sized nuclear power stations.
The company also expects fast-industrializing cities in the coastal zone to increase their use of gas. Expansion of the natural gas network to new regions will boost gas use.
“In addition to natural gas, China also uses relatively large amounts of heavy and light oil, as well as gassified coal,” Pekkola adds. “This means extra markets for good combustion technology.”
Aside from financial profitability, environmental matters were an important element in Finnfund’s decision to invest in the Wuxi production plant.
“We aim to be a participant in providing developing countries with technology that helps reduce power production emissions to the Nordic level, said Finnfund’s managing director, Jaakko Kangasniemi.