SsangYong Motor Company, part of the Mahindra Group has announced that as part of its effort to grow in China, it will collaborate with Shaanxi Automobile Group for a JV. The two companies have signed a letter of intent (LOI) that will establish a local production plant for CBU vehicles. The signing ceremonywas held in Xi’an in Shaanxi Province, China on October 11. With a local production facility in China, Ssangyong to gain new growth momentum to become a strong global SUV manufacturer.
The joint venture will be Ssangyong’s first overseas production base in a 50/50 partnership with the Shaanxi Automobile Group. The new JV will construct production facilities for CBU vehicles and an engine plant on a site with an area of 1.23 million square meter in the Xi’an Economic and Technological Development Zone. The first phase of construction will establish a plant with an annual capacity of 150,000 units per year by the end of 2019 and the second phase will involve an expansion of the facilities to 300,000-units annually. Ssangyong will also establish an automotive cluster with its major suppliers that will also enter the market, to ensure product competitiveness, and start the production of Ssangyong’s current models and models under development, in the second half of 2019.
Next steps for the proposed JV will involve obtaining the approval from Ssangyong’s Board of Directors, the governments of Shaanxi Province and Xi’an, as well as the central government of China. Ssangyong has been reviewing the central and western parts of China for the establishment of its first overseas production facility taking into consideration the Chinese government’s policies and the growth potential of the Chinese automotive market.
Xi’an is a strategic bridgehead for West China Development by the Chinese government and one of the key cities in the central and western Chinese region with an excellent geographical location, industrial infrastructure and facilities, good education and human resources, which give it a comparative advantage over other regions. Due to these advantages, it is a city with great investment potential within China.
Shaanxi Automobile Group Co., Ltd. was established in 1968 and primarily manufactures trucks, buses, small LCVs and pick-ups. The company was producing up to 100,000 units of vehicles by 2014 and is ranked 271th of top 500 Chinese companies, while also being ranked 27th of top 500 Chinese machinery companies.
Ssangyong Motor CEO Choi Johng-sik commented that “it is quite 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 volume,” adding, “The joint venture, which will be Ssangyong’s first overseas production base, will serve as a new growth engine for Ssangyong as the company continues its efforts to become a strong global SUV manufacturer.”