China South Industries Group Corporation, Changan Automobile Group’s main shareholder, and PSA Peugeot Citroën have signed a contract to create an equally owned joint venture to produce and market light commercial vehicles and passenger cars in China.

The partners will initially focus on introducing the Citroën DS line in China and launching a dedicated new brand for the venture. The contract also allows for the joint venture to market, at a later date, further vehicles under the partners’ other brands, Peugeot and Changan.

Based in Shenzhen, in Guangdong Province, the joint venture will have initial annual production capacity of 200,000 vehicles and engines. It will operate two production lines, through the renovation of an existing line and the building of a new line. Each will produce a specific range of vehicles. The joint venture will also have an R&D center.

The new company will be capitalized at RMB 4 billion (US$590 million), to be shared equally by the two partners, and backed by an initial investment of RMB 8.4 billion (US$1.24 billion).

The first vehicle is scheduled to be launched in second-half 2012. The joint venture remains subject to final approval by the relevant authorities.