A NORTH-East founded electric van business is to expand into the Chinese market in a £63m deal.

The Wearside based Tanfield Group yesterday announced that its US partner Smith Electric Vehicles Corp (SEVC), in which it retains a 25 per cent stake, has signed an agreement with the Wanxiang Group to manufacture vans and buses in China.

It comes after Wanxiang, which manufactures vehicle parts, last week bought £16m of shares in Smith.

Wanxiang, one of the largest non-government owned companies in China, will also invest up to £47m more in the joint venture to develop and manufacture electric powered school buses and commercial vehicles for the Chinese market.

The aim of the deal is to allow SEVC, which retains a manufacturing site adjacent to Tanfield's plant at the Vigo Centre, in Washington, to break into the fast growing Chinese market.

Exporting the vehicles, already used by firms including Coca-Cola and Sainsbury's, from the UK or US to Asia is not a cost effective option.

It will start with a school bus design and expand to electric trucks similar to those already produced by Smith on Wearside and in Kansas City.

In a statement yesterday Tanfield said: "The board is pleased to announce that at an event in Los Angeles its US associated company, Smith Electric Vehicles Corp, has signed a letter of intent with Wanxiang Group, a global leader in automotive parts manufacturing and supply."

SEVC chief executive Bryan Hansel, said: "Wanxiang's high quality precision manufacturing capabilities and purchasing relationships bring significant value to our business in our current stage of development."

Pingyi Li, executive director of Wanxiang's electric vehicle division, said: "Smith's market leadership in the US and Europe bring valuable experience and technology to address the significant opportunity for all-electric commercial vehicles in China.

"Working together, we see tremendous opportunity to serve this growing market."

Smith's UK business was owned by Tanfield before it agreed, in January last year, to sell its electric van division to its US partner in a £9.74m deal, although as part of the sale Tanfield retained a significant shareholding in the business.

That deal came after it rejected a £37m offer, made in March 2010 to buy the Smith Electric Vehicles business outright.