If a deal goes ahead, the presence of the company in Shenzhen would help foster the auto industry which was nearly absent in the city, the source said yesterday, but declined to name the company.

The project would provide opportunities for domestic auto components makers, especially those in the Pearl River Delta area and East China's Yangtze River Delta, to enter the global markets.

The auto industry on the mainland has grown dramatically - driven by strong demand for private cars. As more foreign auto giants have entered the Chinese market and formed joint ventures with local companies, the auto components manufacturers remain small although the average profit margin could be around 18 per cent.

"Most of these components makers lack proper channels to export their products. While these companies have edged their way into the global market, their components could hardly be used in vehicles made by famous names such as GM or Ford in the original markets," said Liang Yudong, a director of Shenzhen Enterprise Federation.

"Many of the exported vehicle components by Chinese companies are used as substitutes in the automobile after-sale markets and priced low," said Liang.

In a move to improve its industrial structure, the Shenzhen government has decided to develop the auto industry by introducing overseas strong players.

So far there are four companies in the city producing vehicle components, two for automobile windows and two for automobile hi-fi sets.

"The overseas companies could introduce not only advanced technology and handcrafted products but also a set of standards for domestic companies," said Liang.