HD Construction Machinery is accelerating its expansion in the power generation engine business, leveraging its Gunsan engine plant in North Jeolla Province. Amid growing demand for emergency power generation engines driven by the proliferation of AI (artificial intelligence) data centers and rising electricity consumption, the company aims to cultivate its engine division as a new cash cow (source of cash flow) by expanding production capacity for both defense and power generation products.
According to industry sources on the 29th, HD Construction Machinery recently completed the mechanical completion of the Gunsan engine plant and has entered the pilot product phase in Yangsan. The company is currently focused on final preparations to commence operations, targeting full completion in the second half of this year.
The Gunsan engine plant is a production facility under construction by HD Construction Machinery with an investment of approximately 116.8 billion won. Upon completion, it will have the capacity to produce 120 tank engines for defense purposes and 1,250 ultra-large-scale power generation engines rated at 3 MW (megawatts) annually. Once the Gunsan plant becomes operational, new revenue is expected to grow from 330.1 billion won in 2028 to 552.9 billion won by 2030. In particular, HD Construction Machinery plans to sequentially launch emergency power generation engines, including a 37-liter class model in 2027 and a 77-liter class model in 2028, utilizing the Gunsan plant.
The background behind HD Construction Machinery's strategy to grow its power generation engine business with Gunsan as a hub is the expanding demand centered on AI data centers. According to the International Energy Agency (IEA), electricity demand from AI data centers reached 485 terawatt-hours (TWh) last year, an increase of 16.6% compared to the previous year. As power infrastructure shortages deepen, data center operators are taking steps to secure their own power supply. While ESS (Energy Storage Systems) is emerging as a supplementary power source, demand for emergency diesel engines is also rising in tandem.
In fact, the profitability of HD Construction Machinery's engine business is improving. The operating profit margin of the engine division recorded 14.3% last year and rose to 15.3% in the second quarter of this year. Compared to an operating profit margin of 12% in 2022, profitability shows a consistent upward trend. In terms of absolute value, the operating profit for the first half of this year surpassed 100 billion won. If this trend continues, achieving an annual operating profit of 200 billion won this year is also within reach.
Accordingly, HD Construction Machinery has decided to cultivate its engine business as a medium- and long-term growth driver. The company has set a goal to expand engine revenue to 2.5 trillion won by 2030, approximately double the current level. Additionally, it projects that power generation engine revenue will increase from around 370 billion won last year to the 825 billion won range by 2030.
HD Construction Machinery is also expanding its large-engine production line at the Incheon plant, which previously produced small and medium-sized engines, to meet demand in the commercial generator market. Furthermore, while enhancing the supply capacity for large power generation engines, the company plans to focus on producing products tailored to the output and usage requirements of customers in key markets, including North America. An official from HD Construction Machinery stated, "The engine business is a core sector that will drive the company's new growth in the medium to long term," adding, "Through the completion of the new Gunsan engine plant and the expansion of the Incheon plant, we will respond to increasing global demand and strengthen our market competitiveness through continuous technological development."
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