German engine maker Deutz said Wednesday it has agreed with Swedish truck maker Volvo to pull the plug on their planned joint venture in China.
"Having completed a thorough and comprehensive review, (Deutz and Volvo) have now agreed that the planned production company should be wound up given the weak prevailing market situation in China," Deutz said in a statement.
The two partners had not yet invested substantial sums in the joint venture, which had been expected to be set up at the end of this year, the statement added.
Nevertheless, Deutz insisted that it remained "convinced of the Chinese market's long-term potential."
It will therefore continue to use "Chinese production facilities in order to meet local demand," it said.
Since 2007, Deutz has been operating a joint venture with First Automotive Works (FAW) Group, one of China's leading vehicle manufacturers.
The venture, Deutz (Dalian) Engine Co., makes three to eight-litre diesel engines, primarily for the Chinese market.