The move comes as global demand for diesel engines revs up in line with louder calls for environmentally friendly vehicles. Diesel engines are considered "greener" than gasoline engines because they emit less carbon dioxide.

It is Nissan Diesel's second technical-assistance alliance with a Chinese firm in a month, following a tie-up with auto parts maker Shanxi Datong Gear Group Co Ltd on transmissions used in high-powered truck engines.

"Demand for low-emission engines is rising in China as consciousness on environmental issue increases in urban areas," Nissan Diesel Senior Managing Director Takeo Okusa told a news conference.

The company is in talks with more than 10 Chinese firms on providing technical assistance for engines and auto components, including compressed natural gas engines, he said without elaborating.

Under the latest agreement, Nissan Diesel will supply components and assistance for assembling 3,153cc diesel engines to Dongfeng Chaoyang Diesel Co in Chaoyang city in northeastern Liaoning province, beginning in October.

The Japanese truck maker hopes to increase sales to China to 10 percent of total overseas sales, or 10 billion yen (US$80.74 million), over the next two to three years, Okusa said.

Sales in China now amount to five percent of that total.

Shares in the Japanese truck maker got a boost from the news, rising 5.43 percent by midday and closing the afternoon session up 2.33 percent at 132 yen. The benchmark Nikkei share average ended up 0.62 percent, while DongFeng Automobile were trading down 0.21 percent at 9.29 yuan at 1610 GMT.

GROWTH OPPORTUNITY

The deal will generate 3.5 billion yen or more in revenue over five years, Okusa said.

That breaks down to roughly one billion yen from engine sales and two billion yen from engine-related components. The remaining 500 million yen will come from licensing fees on technology.

Dongfeng Chaoyang aims to assemble 20,000 Nissan Diesel-designed engines a year, a spokeswoman for the Japanese truck maker said.

Another Nissan Diesel spokesman said Dongfeng Chaoyang would initially buy one billion yen of finished Nissan Diesel-made engines. It would begin assembling engines using components made by the Japanese firm in the summer of 2002, he said.

The tie-up has nothing to do with a 100-percent tariff China has slapped on imports of Japanese vehicles, because the duties do not affect components, the spokeswoman said.

Nissan Diesel has not exported any trucks to China since late June when Beijing imposed the duties, which also affect Japanese mobile phones and air conditioners. It exported about 150 trucks to China in the year to March.

The tariffs came in retaliation for duties imposed on some Chinese farm imports by Japan in April.

Nissan Diesel is owned 22.5 percent each by Nissan Motor Co Ltd and France's Renault.

(China Daily 08/08/2001)