(Adds executive comment, details)
By Edwina Gibbs
TOKYO, June 4 (Reuters) - Mitsubishi Motors said on Tuesday it will make sport utility vehicles at partner DaimlerChrysler's China joint venture, giving Japan's No. 4 carmaker a foothold in a potentially huge market.
This will be the first time Mitsubishi will have its own-brand vehicles built in China, where car makers from around the world are vying to increase their presence, and will give a much-needed boost to Daimler's Beijing Jeep joint venture.
Under the 10-year deal, Beijing Jeep is scheduled to start building the Pajero Sport, or the Montero Sport as it is known in the United States, in the first quarter of 2003, executives told reporters in Beijing.
"This agreement represents a new chapter for Mitsubishi in China," Mitsubishi Senior Vice President Steven Torok said.
"Today's announcement is an important first step in what we hope will be a long, fruitful relationship."
Production is estimated to be 10,000 units a year.
Although sales of the Pajero Sport, a lower and longer version of the Pajero, have fallen off sharply in Japan since the mid-1990s when the vehicles were seen as pioneers in the sports utility market, they remain popular in other countries.
General Motors Corp , however, which started making a sports utility vehicle in China last year, said it lost money on those vehicles, blaming overcrowding in a segment that has six or seven domestic competitors as well as attractive imports.
HELPS BEIJING JEEP
Executives said the Pajero Sport would cost around 300,000 yuan ($35,250), right between Beijing Jeep's low-end Cherokee, which sells for about 110,000 yuan, and the upmarket Grand Cherokee, introduced in China late last year with a price tag of about 540,000 yuan.
Mitsubishi also planned to introduce the full-sized Pajero next year, and hoped to produce other vehicles in China down the road, Torok said.
"In the future other new models will be introduced that cover the whole range of needs in the Chinese market," Torok said.
Financial details of the deal were not disclosed, but Torok said it included royalty and technology fees, with the bulk of revenues to be booked by Beijing Jeep.
The deal is a timely shot in the arm for Beijing Jeep, founded in 1983 as one of China's first joint ventures but which analysts now say has been producing far below capacity in the overcrowded Chinese auto industry.
"The addition of the Mitsubishi brand will enhance Beijing Jeep's competitiveness and bring good prospects for further development," Beijing Jeep Chairman An Qingheng told reporters.
DaimlerChrysler, which owns 37 percent of Mitsubishi, last week extended its deal with the Beijing Automotive Industry (Group), with whom it owns Beijing Jeep, for 30 more years.
STEERING FOR CHINA'S MARKET
Although production numbers remain small, Japanese automakers are moving to grab a slice of China's potentially enormous passenger car market.
Honda Motor Co , which builds Accord sedans and Odyssey minivans in China, aims to produce 55,000 vehicles this year, while Japan's top automaker, Toyota Motor Corp , which already builds buses in China, will start making compact cars from October, aiming to build 30,000 a year.
Toyota is also looking at producing light trucks, luxury sedans and possibly SUVs in China, Japanese media have said.
Nissan Motor Co is expected soon to close an agreement with China's second-biggest auto group, Dongfeng Motor Corp, to produce a wide range of vehicles.
Prior to the announcement, Mitsubishi's shares closed down 6.19 percent at 379 yen, compared with a two percent decline in the Nikkei 225 benchmark average. Analysts attributed the fall to profit-taking and weak sales numbers on Monday after a strong run up in its share price this year.
($1=8.276 yuan)