| Cummins,
the world's biggest diesel engine maker, said on Friday it has clinched a deal
with Chinese commercial vehicle producer Beiqi Foton Motor to create an engine
joint venture in Beijing.
The two sides plan to invest a total of 2.5
billion yuan (US$316 million) in the 50/50 joint venture, which has registered
capital of 1 billion yuan (US$126 million), Cummins said.
The venture,
which will start to make Cummins 2.8 and 3.8-litre diesel engines in 2008, will
have an annual production capacity of 40,000 engines, according to the US engine
group.
The project is part of Cummins' plan to increase its investment
in China by US$300 million by 2010 in order to boost local sales.
China
is now the group's second-largest market after the United States.
The
venture will make engines for light-duty trucks, multi-purpose and sport utility
vehicles, and small construction equipment, all of which will meet the Euro IV
emission standard, Cummins said.
"These new products represent Cummins'
latest efforts to expand its presence in the important China market where we have
enjoyed considerable success over the years," said Cummins President and
Chief Executive Officer Joe Loughrey.
Cummins announced last October
that it aimed to increase its China sales to US$3 billion by 2010 from last year's
figure of more than US$1 billion. The group's global sales stood at almost US$10
billion in 2005.
With the engine venture in Beijing, Cummins will have
10 manufacturing sites in China.
The company runs another joint venture
with Dongfeng Motor, China's third-largest auto group, which makes medium-duty
diesel engines in Central China's Hubei Province. The venture's annual capacity
will grow to 200,000 units by 2010 from last year's 130,000.
Cummins
said on Friday that some of the engines produced by the Beijing joint venture
will be sold overseas.
Cummins' new partner Beiqi Foton, a unit of the
fifth-biggest Chinese vehicle group Beijing Automotive Industry Corp, have been
the long-time leader of the nation's light-duty truck market.
Beiqi Foton
sold a total of more than 310,000 vehicles last year, including 260,000 light-duty
trucks. It also makes heavy-duty trucks and buses under its own brand, and is
working with German-US automaker DaimlarChrysler to form a joint venture in Beijing
to assemble Mercedes trucks.
Beiqi Foton officials said earlier this
year that it planned to enter the passenger car sector next year. It aims to sell
1 million vehicles a year by 2010, with one-fifth being sold overseas.
Cummins
predicted that, driven by strong market demand, production of light-duty trucks
in China would grow by 8 % a year in the foreseeable future.
According
to industry data, total vehicle production in China surged 25.74 % year-on-year
to 5.28 million units in the first three quarters of this year.
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