French automaker PSA Peugeot-Citroen and China's Chang'an Automobile Group formed a joint venture today to make passenger cars and light commercial vehicles, media reported.

This new joint venture, to be based in southern China, is the French carmaker's second Chinese partnership. PSA Peugeot-Citroen already has a joint venture in central China with Dongfeng Motor Corp for producing its Citroen and Peugeot cars. The new move will help PSA tap more into the Chinese auto market, now the world's largest.

Peugeot-Citroen Chief Executive Philippe Varin and China South Industries Group Corp President Xu Bin signed the documents today at a ceremony in Paris for creating the 50-50 jointly owned company. China South Industries Group Corp is Changan's main shareholder. 

The two automakers is initially investing EUR935 million in the venture, which will have an initial annual production capacity of 200,000 vehicles and engines at Changan's Hafei plant in Shenzen, southern Guangdong province. In addition, a new factory will ne built.

PSA will launch its newly released Citroen DS3 sub-compact to the Chinese market and will introduce a new brand for the venture, which can market other vehicles under the Peugeot and Changan brands.

China sales of Peugeot and Citroen vehicles increased 49% in the first half of the year to more than 176,000 units, lifting market share to 3.3% from 3.2% of a year earlier. The Changan JV may help PSA hit its goal of selling 2 million vehicles annually in China by 2020.

PSA expects its China sales to reach 400,000 cars this year, nearing the 450,000-unit capacity of the current two plants of its Dongfeng venture, which is planning a third plant.