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Caterpillar and Navistar have begun discussions with Anhui Jianghuai Automobile, China’s largest exporter of light trucks, concerning a possible joint venture to manufacture medium- and heavy-duty trucks and engines within the country.
If agreed to, Caterpillar and Navistar will gain a pivotal spot in China’s commercial vehicle market. The companies would rely on JAC’s production facilities while incorporating technology and capital from their U.S. partners.
The discussion comes on the heels of Caterpillar and Navistar announcing their intentions to expand commercial vehicle sales outside North America, although Cat has exited the U.S. engine market.
According to The Financial Times, total vehicle sales rose 23 percent in China to $7.2 million in the first seven months of this year, where sales decreased 32 percent to $5.8 million in the United States during the same period.
Experts expect JAC will benefit from the joint venture, despite its poor performance. The company experienced a 32 percent decrease in net profit in the first quarter in spite of a slight increase in sales.
China’s heavy-duty truck sector measured roughly 500,000 units in 2008 according to FT, and is expected to grow as China invests more in infrastructure projects.