First Automotive Works Corp (FAW), one of the top Chinese auto groups, has agreed with South Korea's Daewoo Bus Corp to produce buses in China.

FAW said the two parties will form a 50-50 joint venture on the basis of an existing FAW bus plant in Dalian, a port city in Northeast China's Liaoning Province.

Both FAW and Daewoo Bus, which was spun off from the bankrupt South Korean carmaker Daewoo Motor Co in 2002, will invest US$10 million in the venture, the Chinese firm said.

Initially, the venture will have an annual manufacturing capacity of 1,200 Daewoo city buses. The FAW plant in Dalian is making FAW's own-brand buses.

The venture will be the second bus facility of Daewoo Bus in China, which is the world's second-biggest vehicle market.

Daewoo Bus now has a joint venture in South China's Guangxi Zhuang Autonomous Region. The venture, set up in 1994, has an annual capacity of 5,000 Daewoo buses.

The Dalian venture will also be FAW's second bus partnership with foreign automakers. FAW is making the Coaster buses of Japan's Toyota Motor at a joint venture in Chengdu, capital of Southwest China's Sichuan Province.

China's bus market is growing rapidly as a result of booming tourism and growth in the public transportation sector.

Sales of domestically made buses rose by 9.06 per cent year-on-year to 170,700 units in the first 11 months of this year, according to industry statistics.

Many bus makers in the world, such as Volvo AB, Mercedes-Benz of DaimlerChrysler and Neoplan of MAN, also build their vehicles in China.

However, China's bus sector is highly fragmented.

Currently, there are more than 100 companies making buses in China, which has led to hot price wars.

In order to boost sales, many Chinese bus makers are now making inroads into foreign markets.

Yutong, the biggest bus producer in China, said earlier this year that it aimed to sell one-third of its products overseas annually in the years to come. The company, based in Central China's Henan Province, plans to build a slew of plants in foreign countries. It currently has a plant in Cuba.

Yutong aims to double its overall production to 40,000 buses a year by 2012 from last year.

FAW, based in Northeast China's Jilin Province, is also making own-brand cars, trucks and vans as well as cars and sport utility vehicles under the marques of Toyota, Volkswagen from Germany and Japan's Mazda.

From January to November this year, FAW's sales climbed by 22.7 per cent to 1.06 million vehicles year-on-year, ranking second after Shanghai Automotive Industry Corp.

Source: China Daily