The move comes hot on the heels of SAIC's purchase of Nanjing Automobile Group Co at the end of last month.

SAIC will buy the Shanghai Diesel stake from Shanghai Electric Group Co and become the biggest shareholder of the engine maker, it said in a filing to the Shanghai Stock Exchange yesterday.

"The purchase will enable SAIC to have self-branded engines and develop complete products with well-established core spare parts," SAIC said in the statement. "It will lift SAIC's competitiveness in the commercial vehicle segment."

The acquisition still requires government approval, the statement added.

Shanghai Diesel Engine Co is one of the nation's mainstream engine suppliers. It reported a net profit of 14.68 million yuan for the first three quarters this year while revenue totaled 2.57 billion yuan.

Shanghai Electric Group said in a separate filing yesterday that the engine subsidiary is facing strong competition and a lack of close tie-ups with major car makers and ship builders.

Industry insiders also said Shanghai Electric Group failed to reach agreement with Caterpillar Inc over concern of tight control on foreign investment in China's leading industrial players.

SAIC, the Chinese partner of General Motors Corp and Volkswagen AG, has pledged to wrap up efforts to develop commercial vehicles such as trucks and mini vans in its aggressive 11th Five year plan which ends in 2010.

It plans to produce 600,000 units of self-designed cars by 2010, including 200,000 self-designed passenger cars and 400,000 commercial cars with self-developed technology.

The car maker teamed up with Iveco Corp to buy a controlling stake in a Chongqing-based truck maker in June last year.

The commercial vehicle market expanded quickly last year on strength of a robust economy and a construction boom.

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