German-US auto giant DaimlerChrysler will beef up its commercial vehicle business in China by significantly boosting its local production capacity.

Apart from plans to further expand its commercial vehicle business in Western and Eastern Europe, where it is a leading player, the world's biggest commercial vehicle maker is setting its sights on Asia, and particularly China.

"In order to secure our growth over the long term, we want to significantly increase our presence in the Asian market, of which China is a major aspect," said Andreas Renschler, member of the firm's board of management and head of its truck group and buses.

"China is a crucial market for us both in the present and in the future," said Renschler. "It holds a very important position in our overall business strategy."

China's commercial vehicle market is expected to sustain double-digit growth in the coming years, consultancy firm KPMG said in a report published in September.

Looking at the prospects for China's commercial vehicle industry, a category that excludes sales of consumer passenger vehicles, KPMG said that extensive road projects, increased urbanization and a heavy reliance on public transport should drive the sector's growth.

"This is good news for us," said Renschler.

The sales revenue of the firm's heavy-duty trucks leapt 48 per cent year-on-year in the first eight months of 2006, according to Till Becker, chairman and CEO of DaimlerChrysler North East Asia and chairman of the firm's China executive board.

The company has already sold 700 Mercedes-Benz branded Actros its flagship truck product in China this year, a number that exceeds the model's total sales in 2005, according to Renschler.

He added that the company is also planning to introduce its technologically advanced truck products to China such as the Blue-Tec Diesel technology, which meets Euro emission standard 4 and 5 but achieves fuel savings of up to 6 per cent compared to Euro 3.

All DaimlerChrysler trucks sold in China are currently imported, adding to the cost of these already expensive vehicles.

In a bid to slash costs and drive up sales, Renschler said the firm is planning to boost local production.

In the commercial vehicle sector, the German-US auto giant already has two joint ventures in China, Yangzhou Yaxing Motor Coach Co Ltd, a coach maker in East China's Jiangsu Province, and a venture with Fujian Motor Industry Group Co and Taiwan's China Motor Corp in East China's Fujian Province.

The Fujian project, which is awaiting approval, is expected to produce Mercedes-Benz vans such as the Viano, Sprinter and Vito.

Once completed, the plant will have an annual production capacity of 40,000 vans, according to Becker.

The Stuttgart-headquartered automaker has signed a memorandum of understanding with Beiqi Foton Motor Co, an affiliate of Beijing Automotive, with which it already has a joint venture to produce Mercedes-Benz passenger cars.

It is widely believed that the German-US automaker will use the Foton tie-up as a platform to produce Mercedes-Benz heavy-duty trucks, according to industry analysts and observers.

But Renschler did not elaborate on what form this co-operation would take.

However, according to China's auto industry policy, one foreign carmaker can only form two joint ventures with Chinese partners in one auto segment, which means that DaimlerChrysler would not be able to establish joint ventures with Foton.

It is reported that the carmaker is considering selling its stake in the financially troubled Yangzhou Yaxing venture in order to pave the way for its tie-up with Foton.

But the company declined to confirm this.

Globally, the commercial vehicles business "has become a stable profit pillar for DaimlerChrysler in recent years," said Board Chairman Dieter Zetsche.

It occupies 20.4 per cent of the world's truck and bus market and 17 per cent of the global coach market.

Source: China Daily