IHI Corp. said Friday it will jointly make vehicle engine turbochargers with an affiliate of South Korea's Hyundai Automotive Group.
The two giants will set up a joint venture to start production in the first half of 2015 so they can respond to increasing global demand for the component, which improves fuel efficiency.
The venture, in which IHI will hold 49 percent and Hyundai the remainder, will construct a plant in Seosan, South Korea. IHI will design the turbochargers, destined for Hyundai brand vehicles and those of the South Korean company's Kia Motors.
While initially turning out several tens of thousands of units per year, IHI and Hyundai plan to raise annual capacity to more than 1 million by 2020 and to above 2 million by 2025.
Turbochargers work by forcing air into engine chambers to increase their power output, reducing the amount of exhaust released. The practice of combining turbochargers with small engines, known as "downsizing," is spreading in markets with strict emissions regulations, such as Europe. IHI forecasts global demand for turbochargers will exceed 35 million units in 2015, up from around 25 million last year.