Scania AB, the truck division of Volkswagen AG, has launched a EUR2 billion (US$2.3 billion) manufacturing facility in Rugao, Jiangsu Province, to serve China and other Asian markets, reported Bloomberg.

The new site has an annual capacity of 50,000 vehicles, with production expected to begin before year-end. Scania delivered just over 102,000 vehicles globally last year, and the Rugao plant marks its largest single investment to date.

Scania said it will adopt a modular production strategy to meet local demand and foster innovation. The facility will also produce a new truck line called Next Era.

Western heavy-duty vehicle makers have faced profitability challenges in China due to strong local competition. Scania aims to overcome these with a focus on sustainable transport and long-term service models.

Chief Executive Officer Christian Levin said the company sees strong potential to grow volumes in China by promoting more sustainable and service-oriented ownership solutions.