South Korea’s automotive parts supplier Hanon Systems and China’s Fawer Automotive Parts Limited Co. will set up an auto parts making joint venture with an initial capital of 150 million yuan ($23.4 million) in China.

Hanon Systems said on Tuesday that it and Fawer Automotive Parts Limited signed an agreement to set up joint venture Fawer Hanon Automotive Components (FHAC) in China in the first half of this year. Hanon Systems will own a 55 percent stake in the JV with 150 million yuan capital and Fawer Automotive Parts the remaining 45 percent. They need to obtain approval for their JV plan from the Chinese government.

Shares of Hanon Systems on Tuesday closed 2.43 percent, or 300 won, higher at 12,650 won in Seoul trading.

Through the joint venture, Hanon Systems plans to supply automotive thermal and energy management solutions to car makers in China. FHAC will aim to begin operations by mass producing electric compressors, a key component of an environmentally-friendly vehicle that helps compress air conditioning refrigerants.

The Korean auto parts manufacturer is currently building an electric compressor line at its manufacturing facility in Changchun, China, in which the component will be supplied to Volkswagen in China starting in the second half of this year. Hanon Systems expects the new joint venture to produce 300,000 units of electric compressors by 2020 and raise 66 billion won ($61.4 million) or more in sales.

An unnamed official from Hanon Systems said the company hops to take advantage of the leading position of Fawer Automotive Parts in the Chinese auto components market to increase its market share in the country’s green car industry. Fawer Automotive Parts, a subsidiary of China First Automobile Group that is one of the country`s top three auto groups, raises about 1 trillion won in annual sales.

Hanon Systems also accounts for 14 percent in the world’s electric compressors market, trailing closely behind Japan’s Sanden Holdings Corporation that ranks second with 15 percent market share.

By Kim Jung-hwan and Lee Eun-joo

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]