Chery Automobile Corp plans to team up with Iran's largest auto group, Iran Khodro, on a joint venture that would almost double the Chinese company's capacity in the Middle East.

The announcement was the second time in a week that Chery said it would open a new facility outside China. The company aims to set up twelve overseas operations by the end of the year.

Chery signed a memorandum of understanding with Iran Khodro Investment Development Corp at the recent Auto China 2006 show in Beijing to produce and sell its low-priced Chery QQ 6 subcompact in Iran, according to S.K. Hodjat, export director of Ikido.

The ownership structure of the US$200 million JV has not been decided, as another private Iranian company may also join the partnership, Hodjat said.

The facility is expected to start production in two years, turning out 100,000 units a year, almost double the company's current production output in Iran.

Chery will control a 51% stake in the US$100m Iranian joint venture, which will turn out 25,000 units annually within the first three years. Production will increase to 100,000 units if market demand continues to grow, Chery said.

Chery has also announced it would set up an equally owned joint venture with America's Johnson Controls Inc for making auto interiors.

The venture, located in Chery's home city of Wuhu and backed by a US$30m investment, would enable Chery to improve the quality of its car components as well as increase its international competitiveness, the company said in a statement.