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CHANGCHUN, China, Mar 20 (Reuters) Indian car parts maker Bharat Forge Ltd., launching a ground-breaking Chinese joint venture, denied on Monday that it was close to buying the steel-forging units of German industrial group ThyssenKrupp A.G.

A leading economic daily in India reported last week that Bharat Forge, number two behind ThyssenKrupp, was likely to buy its German rival's forging businesses in the United States and Europe for more than $1.5 billion.

''I think that was a lot of speculation on behalf of some media,'' Chairman Baba N Kalyani told Reuters. ''There's no truth in that.'' Kalyani was speaking at the launch of FAW Bharat Forge (Changchun) Ltd., a joint venture with First Automotive Works, China's largest auto maker, that will produce 100,000 tonnes a year of axles, crankshafts and other components.

Kalyani acknowledged that overcapacity in the auto industry, volatile demand and unstable supply chains would make China a tough place to do business.

But he added: ''If anybody wants to be a significant player in the automotive component business, like we want to be in our area, it would be very hard to do this without being in China.'' Pune-based Bharat Forge, which is investing an undisclosed sum for 52 per cent of the venture, has five wholly owned plants outside India -- four in Europe and one in the United States.

''I think being in China kind of completes the whole global strategy for Bharat Forge,'' Kalyani said. ''If you're not here, then I think you're going to lose out as a global supplier.

China's car industry has suffered excess capacity in recent years that has cut into margins, but analysts expect car sales to keep growing by 10 per cent to 15 per cent a year.

Underscoring the potential of the Chinese market, Ford Motor Co.'s Volvo Car Corp. said on Monday it would begin producing cars in the southwestern Chinese city Chongqing.

Kalyani said Bharat Forge, which trades on a price-earnings ratio of around 40, was on course to be industry leader by 2008.

''We have a fundamental comparative advantage, we have high technology, and we are continuing to gain market share around the world,'' he said.

Indian firms, riding high after a decade of restructuring have begun expanding overseas in a whole range of industries.

But China has been largely a blank until now. China's Commerce Ministry does not even regularly include India in its breakdown of foreign direct investment inflows.

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