China's BAIC drives forward with expansion plans

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China's fifth largest automaker has clinched a deal to buy an auto plant in east China, where it plans to invest billions of yuan to build a new manufacturing base.

Beijing-based BAIC Group, the partner of German automaker Daimler AG and South Korea's Hyundai Motor, on Wednesday signed a strategic framework agreement with Zhenjiang municipal government in east China's Jiangsu Province. The agreement was for the purchase and restructuring of Zhenjiang Automobile Manufacturing Plant.

Based at the plant, BAIC will invest 15 billion yuan (2.42 billion U.S. dollars) to build its automobile manufacturing base in east China.

Construction of the base will be carried out in two phases, according to BAIC.

The base will be capable of producing 150,000 sports utility vehicles and multi-purpose vehicles annually after the first-phase of the project is complete.

The second-phase will focus on manufacturing medium- to high-end passenger cars, new energy vehicles as well as core auto parts and components like engines.

The base will have an overall annual capacity of 300,000 vehicles with an estimated sales revenue of 50 billion yuan, the company said.

However, the firm did not disclose how much the acquisition cost, nor did it reveal when the new base will be operational.

The Zhenjiang plant, located 64 km east of Jiangsu provincial capital of Nanjing, is a state-owned enterprise that can manufacture all types of vehicles except sedans.

The plant has not developed well over the past decade despite the boom in the Chinese auto market.

The Zhenjiang government has promised to support its auto industry.

Sources with the government said an automotive industrial park that covers 20 square km will be built, where auto parts and components will be manufactured for BAIC's base. The park will have an annual industrial value of 100 billion yuan when fully operational.

BAIC has so far established several manufacturing bases across China amid its expansion efforts.

According to its development plan, the group aims to build 3.5 million vehicles by 2015.

In 2012, BAIC Auto sold a total of 1.7 million vehicles, up 10.3 percent year on year.

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