Deutz/Volvo engine partnership targets China

German engine manufacturer Deutz and Swedish construction equipment manufacturer Volvo are discussing the extension of their engine manufacturing joint venture into China.

Deutz, which has supplied Volvo with engines for its construction equipment since 1998, said it had signed a memorandum of understanding with Volvo.

The companies have agreed to look into setting up a Deutz majority-owned joint venture company in China for the production of medium-duty engines for off-highway applications.

"The production company is intended to provide support for the Volvo Group's anticipated growth in non-road applications in Asia," Deutz said, adding that both companies still needed to agree on the final terms for a binding contract.

In 2010, Deutz extended its supply agreement with Volvo that will see it remain the sole supplier of diesel engines from 4 to 8 litres for Volvo construction equipment. The original 15 year contract was due to expire in 2013, and the new supply agreement comes into effect in January 2014.