: Shanghai Automotive Industry Corp (SAIC) and Iveco, a member of the Fiat Group, are to strengthen their partnership in China's commercial vehicle market.

The two companies are planning to make diesel engines and heavy-duty commercial vehicles in Chongqing, said SAIC yesterday.

A new 120 million euro (US$151 million) plant in Chongqing will produce heavy-duty trucks with Iveco's technology.

Zhou Zheng, a senior communications official with SAIC, told China Daily yesterday that SAIC and Iveco also earlier signed an agreement to produce diesel engines with an initial investment valued at 150 million euros (US$189 million).

The announcement came as both automakers reported strong quarterly profits.

SAIC Iveco Commercial Vehicle Investment, a 50-50 joint venture between the two companies, has acquired a 67 per cent share in Chongqing Hong Yan Motors Co Ltd, a former unit of the Chongqing Heavy Vehicle Group Co Ltd, and is conducting a restructuring of the company.

SAIC Iveco Commercial Vehicle Investment expects to produce 40,000 heavy-duty trucks and 30,000 engines per year by 2008.

It is SAIC's largest heavy-duty vehicle project and will help the company build its brand in the market, said Zhou.

"The move is a significant step in our global development strategy," said Iveco Managing Director Paolo Monferino.

Zhang Feilun, an analyst with Shanghai-based Autoera Consulting, said the investment will bolster Iveco's position in the rapidly expanding Chinese market.

China's market for heavy-duty trucks grew by 47 per cent between 1999 and 2004, more than double the growth of the passenger car market.

As early as 2004, SAIC and Iveco signed a framework agreement to develop a long-term relationship in commercial vehicles and engines.

Following its recent strategy to develop passenger cars under its own brand, SAIC is planning to put more focus on commercial vehicles over the next five years, partnering with international auto makers.

"We will team up with market leaders such as Iveco, to expand our presence in China and globally," said Chen Hong, president of SAIC.

Source: China Daily