Dongfeng Yueda Kia, the Sino-Korean car joint venture, expects sales to increase by more than 25 percent this year on 2005, boosted by robust demand for its products in the first five months.

 

The company, run by South Korea's Kia Motors and China's Dongfeng Motor and Yueda Group, aims to sell 140,000 cars this year, up from 110,000 units last year, it said.

 

From January to May, the venture's sales grew by 57 percent year-on-year to 53,659 cars, it said. The growth outpaced China's overall car market which rose by 44 percent in the same period.

 

The venture now has a plant in Yancheng, a city rich in low-cost labor in East China's Jiangsu Province. The firm's sales headquarters are in Shanghai.

 

Dongfeng Yueda Kia will open a second plant in October next year, two months ahead of schedule, said an official from the venture.

 

The new plant, under construction in Yancheng, will have an annual manufacturing capacity of 300,000 cars with a total investment of 6.8 billion yuan (US$850 million).

 

It will help raise sales to 450,000 cars a year by 2010 and control 8 percent of China's car market, the firm said.

 

The new plant will have a world-class production line able to assemble four to five models simultaneously, the venture said.

 

The venture said it plans to have a total of seven models by 2010, up from the current four.

 

According to the official, new models will replace some of the existing products. He also said the venture will launch a 1.5-litre Rio car at the end of this year.

 

When the new plant opens, the venture's workforce will grow by 3,100 to 5,100, he said.

 

Kia has a 50 percent stake of the venture, with the remainder held by Dongfeng - China's third largest automaker - and Yueda, an industrial group in Yancheng.

 

The venture also plans to build a research and development (R&D) center in the new plant.

 

The official said the center "is in response to the government's auto industry policy."

 

According to that policy issued in 2004, a new car manufacturing project in China must have an R&D centre with a minimum input of 500 million yuan (US$62 million).

 

Kia's parent Hyundai Motor also plans to set up a R&D centre at a new 300,000-unit car plant with China's No 5 vehicle producer Beijing Automotive Industry Corp.

 

Hyundai aims to sell 1 million cars in China a year by 2010, accounting for one-fifth of China's car market.

 

Annual car demand in China is predicted to exceed 5 million units by 2010, up from 3.1 million units last year.

 

The current leaders in China's car market are Volkswagen and General Motors, both of which started local production earlier than Hyundai and Kia.

 

(China Daily June 23, 2006)