The tractor unit of Mahindra & Mahindra, which has made steady inroads into the

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highly competitive Chinese market to emerge as one of top five brands in the country, has begun construction of a new engine plant in Yancheng City of China's Jiangsu province.

The foundation stone for construction of an engine manufacturing and assembly plant in China in collaboration with its JV partner Yueda Group was laid on September 6 at a function attended by India's Ambassador to China, S Jaishankar, among others.

The plant is being set up by the Mahindra Yueda Yancheng Tractor Company Ltd (MYYTCL) to provide reliable and fuel-efficient engines in the Chinese market, thus creating additional value for the customer and a competitive advantage for Mahindra Tractors in China, the President and CEO of M&M's China Operations, Harish Chavan, told PTI here.

MYYTCL will invest approximately $14.6 million on the engine plant and another $3.7 million on research and development.

M&M, which has so far invested $110 million in China, has already grabbed a 9.2 per cent share of the fast-developing Chinese market, with annual sales of 29,000 units.

Over 3.18 lakh tractors were sold in China last year.

"This investment signifies our long-term commitment to the rapidly growing Chinese market," Pravin Shah, M&M's Chief Executive, International Operations, Automotive & Farm Sectors, said.

"The plant will not only give us a competitive edge in the domestic market, but will also provide us with access to several other export markets through China," he added.

"This investment will enable us to manufacture reliable and fuel-efficient tractors in line with the value proposition of the Mahindra brand in the global tractor market," he said.

The investment in this state-of-the-art engine plant will help M&M to produce tractors, which offer better performance in terms of fuel efficiency and reliability, Chavan said.

This will provide us with an advantage in the local Chinese market, where most of the engines are outsourced and usually meet very basic standards of fuel efficiency and reliability, he said.

Mahindra signed an agreement to form a Joint Venture (JV) with state-owned Jiangsu Yueda Yancheng Tractor Manufacturing Co Ltd (Yancheng Tractor), a leading Chinese tractor manufacturer, in 2008.

The company's product portfolio comprises tractors ranging from 16 HP to 125 HP.

The company has a strong distribution network covering over 25 provinces in China.

The company is also a leading exporter of tractors from China, with a footprint in more than 60 countries, including the US, South America, Russia, Europe and Africa, he said.