Ssangyong Motor, part of India’s Mahindra Group, has signed a letter of intent with the Shaanxi Automobile Group to examine the feasibility to set up a joint venture to produce both engines and entire vehicles in Xian. Shaanxi Auto, established in 1968, produces heavy and special-purpose trucks as well as new energy ones. The proposed plant would have the capability to build 150,000 cars a year by the end of 2019, and the plans allow for the production of 300,000 cars a year if necessary. The plant would be Ssangyong’s first production base outside South Korea. “It is essential to have a local plant with comprehensive capacity in China, both to increase our competitiveness in the rapidly growing Chinese car market and to increase our sales volume,” Ssangyong CEO Choi Johng-sik said. On October 8, just three days before Ssangyong signed the letter of intent, the Chinese government decided that “in principle it will not approve new joint ventures that produce gasoline cars”, which could make it difficult for Ssangyong to obtain the required approvals, unless it would focus on electric cars. Pang Qinghua, President of Pangda Automobile Trade Co, Ssangyong’s sales agent in China, is pessimistic about the carmaker’s plan. The company’s declining sales, along with its weak brand awareness in China, are also stumbling blocks on its road of localization.The company sold 2,460 units in China last year, a dramatic fall on the 12,000 units sold in 2014. Ssangyong’s total global vehicle sales reached 144,764 last year, with its compact SUV Tivoli accounting for more than 40% of the total, the China Daily reports.