Shanghai Automotive Industry Corp (SAIC), China's top passenger car maker, has clinched an acquisition deal with a heavy-duty truck firm in Southwest China's Chongqing Municipality.

SAIC will form a new company based on Chongqing Heavy Vehicle Corp to produce heavy-duty trucks, sources say.

SAIC has defeated similar proposals from Chang'an Motor Corp - China's No 3 automaker based in Chongqing - and Italy's Iveco which runs a commercial wagon joint venture in East China's Jiangsu Province.

But no details have been revealed about the deal between SAIC and the Chongqing truck firm which is owned by the municipal government.

The Chongqing truck firm sold 16,500 heavy-duty trucks, and reported 5 billion yuan (US$604 million) in sales and 300 million yuan (US$36.2 million) in profits last year.

The deal is seen another move for SAIC, which acquired a number of domestic and foreign automakers in recent years, to develop in China's fast-growing heavy-duty truck market.

SAIC signed a letter of intent with partner General Motors (GM) and the US auto giant's Japanese affiliate Isuzu Motors in late 2002 to form a heavy-duty truck joint venture in Shanghai.

But they have not taken further substantial steps so far.

"It's necessary for SAIC to enter the heavy-duty truck segment to fulfill its ambitious expansion plan in the coming years as it is only a player in the passenger car and mini vehicle segments at present," said Xia Jun, an auto analyst with CCID Consulting Co Ltd, the Beijing-based industry consultancy.

SAIC aims to raise its annual output to 4 million automobiles and become one of the world's six largest automakers by 2020. It sold 782,000 automobiles last year.

Analysts say demand for heavy-duty trucks in China has been strong as a result of the nation's booming logistics sector propelled by its steady economic growth.

Sales of China-made heavy-duty trucks grew by 18.45 percent year-on-year to 197,100 units in the first seven months of this year.

The heavy-duty truck segment in China is mainly controlled by two other Chinese auto big names - First Automotive Works Corp and Dongfeng Motor Corp.

However, many foreign automakers and local smaller players are speeding up efforts in the sector.

Swedish Volvo Truck Corp has a joint venture with a local partner in East China's Shandong Province with planned annual output of 10,000 heavy-duty trucks by 2010.

French Renault is expected to form a heavy-duty truck joint venture with Dongfeng next month in South China's Guangxi Zhuang Autonomous Region.

(China Daily September 6, 2004)