Chang'an Automobile Group announced Thursday that it has signed a letter of intent with France's auto giant PSA Peugeot Citro?n to establish a joint venture in Shenzhen, China, the world's biggest auto market. [video]

The joint venture will produce light commercial vehicles and passenger cars, with each company holding a 50 percent share, said the state-owned Chinese leading automaker in a joint statement with Peugeot.

With the new joint venture, Peugeot is targeting to sell 2 million vehicles annually in China by 2020 to gain a 10 percent market share, said Claude Vajsman, president of Peugeot's China division.

Peugeot also plans to cut the carbon emission volume of its cars sold in China by 50 percent in the next ten years, Vajsman told Xinhua.

The two sides are still discussing details of the venture, he said.

Peugeot established its first joint venture with China's Dongfeng Motor Group 18 years ago, but the company is still seeking a larger share of the Chinese auto market.

China sped past the United States as the world's largest auto market last year, with car sales up over 40 percent year on year.