Fiat's Iveco unit will form a venture to make heavy trucks and diesel engines in China to meet the country's need for construction equipment ahead of the 2008 Olympic Games.

Iveco and SAIC Motor, the country's largest carmaker, will together buy 67 per cent of Chongqing Hongyan Motor, a unit of Chongqing Heavy Vehicle Group, and use its factory to make 40,000 trucks a year by 2008, Shanghai-based SAIC said.

The three companies will produce 30,000 diesel truck engines a year in a separate venture in Chongqing.

Iveco follows MAN, Volvo and Isuzu Motors in assembling commercial vehicles and construction equipment in a country that is likely to become the world's second-biggest user of heavy trucks by 2012.

Volvo last year formed a 600 million yuan venture with China National Heavy Truck.

China's 31 makers of heavy-duty trucks, each able to carry more than eight tonnes, sold 381,869 units last year, 49 per cent more than in 2003, according to the China Association of Automobile Manufacturers. China was the world's second-biggest producer last year of heavy and medium trucks after the US.

SAIC's expansion into heavy trucks may help it boost sales to two million units in 2010 from last year's 847,000 units.

The carmaker, with a 25 per cent share of China's car market last year, also makes passenger sedans and compact cars with Volkswagen and General Motors.

SAIC sold 40,078 commercial vehicles in the first 10 months of the year, compared with the 180,082 sold by FAW Group, the country's biggest carmaker, and the 220,699 units sold by third-ranked Dongfeng Motor, according to data by the China Association of Automobile Manufacturers.

"SAIC will speed up development of commercial vehicle manufacturing in the next five years by co-operating with leading Chinese and foreign heavy truck makers," SAIC president Chen Hong said.

"We will actively expand overseas after securing our share in [the] local market."

SAIC-GM-Wuling Automobile, SAIC's venture with GM, makes Sunshine brand minivans and PLN pickup trucks in China.

SAIC makes GM's Buick sedans, GL8 vans and Cadillac luxury cars in Shanghai.

The company has a separate venture with Volkswagen that makes Santana and Passat compact cars in the city.

Chongqing Heavy was China's sixth-largest maker of heavy-duty trucks last year, with total sales of 17,029 units and 3.4 per cent share of the market.

Iveco has a venture producing light commercial vehicles Nanjing.