Hyundai Motor Co. said Sunday it has agreed to launch a $400 million truck manufacturing venture in China with a local partner as it seeks further inroads in the world's biggest auto market.
Hyundai Motor, South Korea's largest automaker, said it signed an initial agreement with Chinese commercial vehicle manufacturer Baotou Bei Ben Heavy-Duty Truck Co. and has set a sales target of 100,000 heavy duty trucks in China by 2014.
Under the deal, signed Saturday in Seoul, the two companies will invest a total of $400 million to set up the 50-50 joint venture next year, Hyundai said. It will take over the Chinese company's existing large truck business that can manufacture 40,000 vehicles a year.
Hyundai, which already makes passenger cars in China, said it will initially focus on heavy duty trucks in the new venture and gradually boost its investment to include what it described as a "full lineup of commercial vehicles."
"The joint venture will initially launch a refreshed Baotou Bei Ben model and then launch a brand new model by 2012 with input from Hyundai's modern technology and equipment, gaining competitiveness in the Chinese commercial vehicle market," Hyundai said in a release.
"Entering China's commercial vehicle market is essential in establishing Hyundai's reputation as the most comprehensive car manufacturer in the world's largest auto market," Choi Han-young, vice chairman in charge of Hyundai's commercial vehicle division, said at the signing of the deal, according to the release.
"Our business in China will play a pivotal role in helping us achieve our global sales target of 200,000 units in commercial vehicles by 2013," he added.
Hyundai and affiliate Kia Motors Corp. form the world's fifth-largest automotive group. Both companies have been expanding aggressively overseas.
Hyundai has factories in China, India, Turkey, the United States and the Czech Republic. Kia, in addition to its recently opened U.S. plant, also manufactures automobiles in China and Slovakia.
Both automakers reported record-high quarterly net profits in the three months ended Sept. 30.
Hyundai also plans to enter the commercial vehicle market in the U.S. within 2-3 years by setting up a venture like the one in China, South Korea's Yonhap news agency quoted Choi as saying in an interview published Sunday. After the U.S., Hyundai would target Europe, Choi said, according to Yonhap.
South Korea signed a free trade agreement with the United States in 2007, though the deal has yet to take effect as it remains unratified by lawmakers in both countries. South Korea has also concluded a free trade deal with the European Union, though a final agreement has yet to be signed and ratified.
South Korea enjoys large trade surpluses in automobiles with both the U.S. and EU and that has been a source of friction for the country with Washington and the European auto industry.