Hyundai Motor, the biggest South Korean automaker, will build its third automobile joint venture in China in a fresh effort to raise its annual output in the nation to 1 million units by 2008.

The company said that it has clinched a deal with China's Jianghuai Automobile Co Ltd to form a 50-50 commercial vehicle joint venture in Anhui Province.

The two sides will invest US$780 million in the joint venture before 2010.

The joint venture will have an annual production capacity of 90,000 trucks, 10,000 buses and 50,000 engines by 2010.

At present, Hyundai Motor and its affiliate Kia Motors run two passenger vehicle joint ventures with different partners in Beijing and East China's Jiangsu Province respectively.

The Shanghai-listed Jianghuai Automobile, which has an annual capacity of 120,000 vehicles a year in Anhui, is making commercial wagons and trucks under technical licensing deals with Hyundai.

"Hyundai has to invest heavily in China as part of its efforts to become the world's No 5 automaker by 2010 as China is the world's fastest-growing vehicle market and it has severed ties with DaimlerChrysler," said Xia Jun, an auto analyst with CCID Consulting Co Ltd, the Beijing-based industry consultancy.

Sales of China-made vehicles grew by 21 percent year-on-year to 2.9 million units in the first seven months of this year.

DaimlerChrysler sold its 10.5 percent stake in Hyundai last month.

Hyundai's joint venture in Beijing, with Beijing Automotive Holdings Corp, plans to raise its annual output to 200,000 units in 2005 and to 600,000 units in 2008.

The venture, which is making the Sonata and Elantra sedans and will make Tucson sports utility vehicles at the end of this year, aims to produce 130,000 vehicles this year, up from 550,000 last year.

Kia's joint venture in Jiangsu, with Dongfeng Motor Corp - one of China's biggest automakers - and Yueda Group, will quadruple its annual production capacity to 400,000 units by 2008 with a total investment of US$648 million.

The venture, which is producing the Qianlima compact sedan and Carnival commercial wagons and will launch the larger Optima sedan on Saturday, aims to increase its sales to 80,000 units this year from 50,000 units last year.

Hyundai also has a technical licensing partner in East China's Shandong Province - Huatai Automobile, which is producing the Terracan sports utility.

Huatai Automobile said earlier that it also hopes to form a passenger vehicle joint venture with Hyundai.

However, Huatai's plan faces hurdles from China's auto industry policy.

If a foreign automaker controls a majority stake in another foreign one, they will be treated as one company in China and only one foreign automaker will be permitted to set up two joint ventures in China to produce the same types of vehicles, according to the auto policy.

But foreign automakers will be allowed to have more than two joint ventures in China to produce the same types of vehicles if they join forces with their existing joint venture partners to merge with other companies in China.

Analysts say Hyundai will have to team up with Beijing Automotive, Dongfeng or Yueda to acquire Huatai in an attempt to create a joint venture with Huatai.

(China Daily September 10, 2004)