China South Locomotive, Liaoning SG form EV Venture

China South Locomotive & Rolling Stock Corp., the nation's largest maker of rail carriages, plans to set up a venture with Liaoning Shuguang Automobile Group Co. to tap expected demand for electric vehicles in the world's biggest auto market.

The companies will invest at least 442.2 million yuan ($65 million) to expand two existing subsidiaries and set up an automobile sales unit, according to a statement China South filed to the Hong Kong stock exchange late yesterday.

Vehicle sales in China surged 46 percent to 13.6 million units last year, surpassing the U.S. for the first time. Daimler AG Chief Executive Officer Dieter Zetsche said yesterday the country has the potential to be one of the world's largest markets for zero-emission automobiles.

China and the U.S. are looking to cut their greenhouse-gas emissions that together account for 40 percent of the world's total and reduce reliance on oil imports. Premier Wen Jiabao's government is considering levying a tax on vehicle emissions as part of the nation's efforts to mitigate pollution.

China South and Shanghai-listed Liaoning SG join Chinese carmakers including Warren Buffett-backed BYD Co. and Chery Automobile Co. in developing alternative-energy vehicles to curb oil imports and pollution.

Daimler and BYD said yesterday they plan to jointly develop an electric vehicle for the Chinese market. Shenzhen-based BYD signed a separate agreement in May with Volkswagen AG, Europe's largest automaker, to explore cooperation in areas including hybrid cars and lithium-battery powered electric vehicles.