Dongfeng Motor Corp, one of China's key State-owned automakers has teamed up with a privately-owned motorcycle company to venture into the mini-van market.

Dongfeng and the Yu'an Group, based in Southwest China's Chongqing Municipality, have formed a joint venture in Shiyan in central Hubei Province to produce mini vans.

The venture, in which both Dongfeng and Yu'an have a 50 per cent stake, launched the first Dongfeng brand mini van on Sunday. The van carries the name "Xiaokang", which, literally translated, means moderately well-off.

The joint venture plans to produce 20,000 Xiaokang mini vans this year, said Li Zhenhua, the venture's chairman.

The venture's annual output will increase to 150,000 units by 2008, Li said.

Dongfeng and Yu'an have invested 200 million yuan (US$24.2 million) in the venture.

"It (the launch of the Xiaokang mini van) will fill Dongfeng's blank in the mini van market and will be a new start for us in building own brand vehicles," said Fan Zhong, a senior official of Dongfeng Motor Corp.

The 1.0 and 1.3-litre Italian-designed Xiaokang mini vans retail for between 35,000 yuan (US$4,227) and 45,000 yuan (US$5,435).

Analysts said the move was part of Dongfeng's efforts to expand its product portfolio and output.

"In the past Dongfeng only competed in the car and truck markets. It is understandable that the company should want to enter the mini van sector to compete with other big Chinese automakers," Zhang Xin, with Guotai & Jun'an Securities Co Ltd, told China Daily yesterday.

The company currently produces cars for Citroen, Peugeot, Nissan, Honda and Kia as part of joint ventures, as well as own brand trucks.

Last year Dongfeng was overtaken by both Chang'an Motor Corp and Beijing Automotive Industry Corp to drop from third to fifth in the national rankings in terms of unit sales.

Dongfeng's sales grew only 6.8 per cent to 523,300 vehicles last year.

Chang'an Motor and China's top two automakers, First Automotive Works Corp and Shanghai Automotive Industry Corp, all have a strong presence in the domestic mini van market.

However, Dongfeng regained its No 3 position in the first four months of this year by selling 233,700 vehicles.

"Mini vans sell well in China, especially in small and medium-sized cities and vast rural areas, as a result of regional economic development imbalances," Zhang said.

Industry statistics showed domestic mini van sales grew 10.5 per cent to 920,000 units last year, accounting for some 17 per cent of China's total vehicle market.

Fu Yuwu, vice-president of the China Automotive Engineering Society, said that energy-saving and environmentally friendly small-sized vehicles would be one of priorities for the future development of China's auto industry.

Executives from the joint venture between Dongfeng and Yu'an said it would use Yu'an's existing motorcycle sales channels to market mini vans.

They said the joint venture would also target overseas markets, such as Southeast Asia and the Middle East.

According to Fu, last year China's mini vehicle exports showed 100 per cent year-on-year growth.

(China Daily May 24, 2005)