Yulon Motor, Taiwan's largest carmaker by revenue, has set up a joint venture with China's Dongfeng Automobile to produce the island's first locally-designed luxury sedans, Yulon said Wednesday.

The 50-50 joint venture, called Dongfeng Yulon, will have an initial investment of 1.55 billion yuan (230 million US dollars), Yulon officials said.

They were speaking after a ceremony Tuesday to unveil the new joint venture, located in Hangzhou, in eastern China's Zhejiang province.

The new company is scheduled to start mass producing high-tech passenger vehicles designed by Luxgen Motor, an affiliate of Yulon Motor, in the first quarter of 2011.

"The joint venture is likely to make money in 2012," Yulon Chairman Kenneth Yen was quoted by Kelly Chang, spokeswoman for Luxgen Motor, as saying.

The statement is based on predictions that sales of luxury sedans produced in Hangzhou will hit a target of 60,000 units that year.

He said that by 2018 the company hoped to be able to offer 12 types of Luxgens including several electric models, with sales of up to half a million units.

Yulon, which mainly produces Nissan cars in Taiwan under licence, has already invested in a joint venture with a Chinese automaker and Daimler to make Mercedes vans in the southeastern province of Fujian.

The Luxgen project has cost Yulon about 15 billion Taiwanese dollars (500 million US) since it started four years ago.

The first Luxgen, a 2.2-litre minivan for family use, was unveiled in Taiwan in September and since then Yulon has sold more than 10,000 units, Luxgen said.

The company will make the first shipment of 100 Luxens to Vietnam and the Dominican Republic this week, Chang said, adding that Luxgen is also targeting markets in the Middle East.