Ssangyong Motor Co to set up manufaturing plant in China by forming joint venture with China's Shaanxi Automobile Group

Mahindra Group's South Korean arm Ssangyong Motor Co will set up a manufacturing plant in the world's largest automobile market, China by forming a joint venture with China's Shaanxi Automobile Group.

Ssangyong Motor Co, which was acquired by Mahindra & Mahindra in 2011, has signed a letter of intent (LOI) with the China's Shaanxi Automobile Group for a joint venture that will establish local production plant for CBU vehicles as parts of its efforts to grow in China.

The proposed plant with an installed capacity of 3 lakh units annually in China will also be the first manufacturing unit of the company outside South Korea.

"It is essential to have a local CBU plant in China to increase our competitiveness in the rapidly growing Chinese car market and to increase our sales volumes," Ssangyong Motor CEO Choi Johng-sik said.

According to a regulatory filing by M&M, the proposed 50:50 JV will serve as a new growth engine for Ssangyong asthe company continues its efforts to become a strong SUV manufacturer.

The first phase of construction will establish a plantwith an annual capacity of 1.5 lakh units per year by the endof 2019 and the second phase will involve an expansion of thefacilities to 3 lakh units annually.

"Furthermore, Ssangyong will establish an automotivecluster with its major suppliers that will also enter themarket, to ensure product competitiveness and start the production of Ssangyong's current models and models underdevelopment in the second half of 2019," it said.

With the signing of the LOI, Ssangyong and ShaanxiAutomobile will form a team to work on the Xi'an project anddiscuss the details for the establishment of a joint venture. Next steps will also involve obtaining regulatoryapprovals, the company said.

Established in 1968, Shaanxi Automobile Group manufacturestrucks, buses, light commercial vehicles and pick ups amongothers.