"Dongfeng will provide the technological expertise, Yulon is providing the platform design, and we will build the vehicles," says Peipei Tian, executive general manager of Zhejiang Zhongyu Automobile Co.

Zhejiang Zhongyu Auto has dealt with Dongfeng Motor before. In 1989 it built the Z11 mini-van ?on a Dongfeng-designed platform - at Wuhan Zhongyu Automobile Co. in central China?s Hubei province.

In 2007 production of the van was stopped due to poor sales.

Wuhan Zhongyu Auto is an 80-20 joint venture between Dongfeng and Zhejiang Zhongyu Auto. In late 2008, Dongfeng bought over the remaining 80 percent of Wuhan Zhongyu Auto.

Nonetheless, co-operation between the two companies is now set to resume.

In Hangzhou a new vehicle production company has been registered: Hangzhou Nazhi Jie Automobile Co. It aims to produce high end SUVs and MPVS. The brand will be called LUXGEN in English. "The logo has been decided, but nothing else; we not sure yet of the model name," says Tian.

The SUV will fetch above 150,000 yuan ($22,000), according to Zhao Jun, an executive at Zhejiang Zhongyu Auto.

With an initial capital investment of 450,000,000 yuan ($66 million), Hangzhou NazhiJie will occupy a 260,000 square meter plot behind Zhejiang Zhongyu Auto's existing 30,000 square meter plant in Hangzhou, Zhejiang province. The plant will have an annual production capacity of 120,000 vehicles.

Zhejiang Zhongyu Auto is owned by Zhejiang Zhongyu (Holding) Group Co., a privately held group engaged in automobile parts and industrial lighting manufacturing as well as real estate.