ISTANBUL -- Turkish vehicle maker Tofas signed an agreement with France's PSA Peugeot Citroen and Italy's Fiat on Thursday for the joint development and production of light commercial vehicles.
The new vehicle, named Minicargo, is scheduled for rollout in 2008 and will extend the current Peugeot, Citroen and Fiat product ranges, PSA said in a statement in Paris.
Tofas, a joint venture between Fiat and Turkey's Koc Holding, said the vehicles would be produced at its plant in Bursa, in northwestern Turkey.
Annual production capacity would be 135,000 units, with two-thirds for PSA and one-third for Fiat, including Tofas.
Total investment for the Minicargo project is estimated at about 350 million euros ($453 million).
Tofas Chief Executive Officer Diego Avesani said production would begin in the final quarter of 2007 and that 95 percent of the output was targeted for export.
"This project will enable us to increase exports but we also aim to increase our share in the Turkish automotive market," Avesani said in a speech before the Istanbul signing ceremony.
Mustafa Koc, head of Koc Holding, said the project would be financed by bank loans.
"Over an eight-year period, around a million vehicles will be produced, providing an annual export income of $1 billion," Koc told reporters.
He said auto exports accounted for about 15 percent of Turkey's total exports in 2004, earning some $10 billion. Turkey ranked seventh among European car producers in 2004, with 860,000 vehicles.
Tofas reported a net profit of 54.16 trillion lira ($37 million) in the first nine months of 2004, returning to profit amid a strong industry-wide revival. Tofas had suffered a loss of 31.03 trillion lira in the same period in 2003.
Turkey hopes its proximity to Europe, its low costs and well-trained workforce will encourage more automakers to increase local production capacity, but high taxes and bureaucratic hurdles could hamper this ambition, analysts say.
Fiat and PSA already have two joint ventures to make commercial and passenger vans in France and Italy, including the Fiat Doblo, which has been one of the company's more successful models.
Fiat Chief Executive Sergio Marchionne has repeatedly said he wanted to sign new joint ventures to expand the ailing carmaker's range and reverse a sales slump, without having to shoulder all the costs of development and production.
Earlier this year, Fiat signed a licence agreement to make and distribute cars in Iran, raising ire among Italy's unions who fear that too much production will be moved abroad, where labor costs are lower.