Moving to tap the fast-growing SUV market in China, Mitsubishi Motors Corp recently formed a joint venture with Guangzhou Automobile Group Co.

The low-profile ceremony to announce the new GAC Mitsubishi Motors Co held on Oct 12 came after the original September announcement was postponed due to an ongoing territorial dispute and anti-Japanese protests in many Chinese cities last month.

Mitsubishi plans to produce its ASX and Pajero SUVs at the joint venture in Changsha, Hunan province. Annual production capacity is projected to reach 300,000 units in five years.

In a statement Mitsubishi said the partnership will cater to the diverse needs of local customers and the lineup will not be limited to SUVs.

GAC has 50 percent share in the joint venture, with Mitsubishi Motors holding 33 percent and Mitsubishi Corp, the conglomerate's trading company, owning the remaining 17 percent.

The company emerged after a complex reshuffle at GAC Changfeng Motor Co, an SUV maker whose top shareholders were GAC and Changfeng Group.

Mitsubishi held a 15 percent share in the three-way venture.

The partnership has inherited the former factory, supply chain and distribution network of GAC Changfeng.

It is the first joint venture for Mitsubishi to hold a full 50 percent stake in China.

The Japanese company also has an existing 25 percent stake in Fujian-based Soueast Motor Co, where it produces its Lancer, Lancer Ex and Galant sedans, as well as the Zinger crossover.

Starting imports to China in the 1980s and local production in the 1990s, Mitsubishi was once the best-selling Japanese car brand in the country.

But without powerful local partnerships or a product portfolio that could compete in China's increasingly crowded market, its business in the country has been tepid for the past several years.

Last year Mitsubishi sold only about 64,000 vehicles in the country, including imports and locally made products, according to statistics provided by LMC Automotive.

With the new joint venture and a booming SUV segment, it is planning a comeback.

In the first nine months of the year, China's SUV market surged by 29 percent over a year earlier to more than 1.4 million units, according to China Association of Automobile Manufacturers.

The compact SUV segment, where the ASX competes, has increased even faster.

But it will still be a challenge for Mitsubishi to stand out in the burgeoning SUV market as more brands join the race and competition becomes even fiercer, analysts said.

As well, the current sensitive relations between China and Japan make for an even harder start for Mitsubishi, they said.

Last month Mitsubishi's China sales tumbled by 62.9 percent from a year earlier to only 2,340 vehicles after protests kept consumers away from Japanese brands' showrooms.

"The sharp fall in sales will make it difficult for the new joint venture to establish and maintain dealerships," said Mei Songlin, vice-president and managing director of the China operations of consultancy JD Power.

Domestic media reports cited sources in GAC saying that the joint venture has recruited 39 dealerships in the first half this year and it plans to have 81 by the end of the year.

hantianyang@chinadaily.com.cn