China Automotive Systems (CAAS), a China-based supplier of power steering components and systems, will form a joint venture with two local Brazilian automotive companies to target the South American automotive market.

The names of the two Brazilian companies were not revealed but the company through its subsidiary Hengsheng, will have an 80 percent stake in the partnership that is to be set up, which will be based in Sao Paulo and the Brazilian partners will have stakes of 15 percent and 5 percent.

CAAS Chairman Hanlin Chen said Brazil is the most important economic engine in South America, and China has surpassed the US as Brazil's leading trade partner.

"The automotive market is on the rise in Brazil, with current annual OEM demand estimated at 3.5 million vehicles and a rapidly growing aftermarket sector," Chen said.

"We have seen Chinese automakers, such as Chery Auto, one of our largest customers, successfully penetrate the Brazilian market with high quality, value-added vehicles and believe we can also leverage this trend.

"Our local partners have proven track records in production and distribution and we believe our strong product development capabilities and high quality control processes for mass production will create tremendous value for local OEM and aftermarket customers.

"This joint venture will enable us to capitalize on the significant growth opportunities presented by Brazil and South America, as a whole."