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FRANKFURT, March 20 (Reuters) - German electronics and engineering giant Siemens AG said on Thursday it had reached a joint venture agreement with carmaker Volkswagen AG to produce diesel injection systems.
The venture, with a planned investment volume of around 270 million euros ($286.6 million), is expected to launch production in the fourth quarter of 2004 and would employ 690 people by mid-2007, Siemens said in a statement.
The new company, to be called Volkswagen Mechatronic GmbH, will produce high pressure injectors which lower fuel consumption and produce exhaust emissions below new European Union limits due to come into force in 2005.
Along with French rival PSA Peugeot-Citroen , VW is widely held to have been ahead of the game with diesel engines, using more advanced technology than Japanese rivals and than U.S. giant General Motors , which lost market share in the late 1990s when it failed to embrace diesel.
Rising fuel taxes and a drive to lower carbon dioxide emissions have made diesel engines increasingly popular and less expensive than petrol versions in western Europe in recent years, accounting for over a third of new car sales.
Forecasting group JD Power-LMC has said it expects that share to rise to about 50 percent by 2005-2006.
Volkswagen is also currently the only major carmaker selling diesel engine cars in the United States, the world's largest car market, where its diesel sales jumped by a quarter last year to 31,220 units.