GAC Group, one of China's largest State-owned carmakers, is setting up a joint venture with the country's leading AI company iFlytek, as the car industry is shifting toward digitalization.

The joint venture will focus on smart interiors, internet of vehicles technology as well as car-related digital services, according to a deal the two inked on Monday.

"The car industry has entered into the critical stage of industrial revolution. Smart, connected and digital functions have become key to the industry's growth," said GAC on its official WeChat account.

GAC said the joint venture will strive to become a benchmark in terms of technologies and products.

However, the company will not take GAC as its only client but will offer solutions to carmakers in China and overseas. Neither GAC nor iFlytek revealed the value of their investment in the partnership.

iFlytek is a leading intelligent speech and voice recognition company. It has worked with carmakers on over 1,200 models and its functions are available in over 25 million cars including those from GAC, the company said.

GAC and iFlytek first collaborated in 2017, and they set up a research center in 2018.

Analysts said the partnership could help GAC to reach its goals for the next five years unveiled at the Guangzhou auto show that concluded last week.

It set a sales goal of 3.5 million vehicles by the end of 2025 and key R&D areas include electrified, smart and digitalized vehicles.

In the first 10 months this year, the carmaker, partner of Toyota and Honda, delivered 1.62 million vehicles.