Gasgoo.com (Shanghai June 19) - This week, foundation work was laid on Guangqi Fiat's production site, auto.163.com reported today. The site is scheduled to begin production by the first quarter of 2016. The 4.23 billion RMB ($686.59m) site is designed to manufacture 160,000 vehicles a year, which are hinted to be Jeep vehicles.
Similar to how FAW-VW produces Audi vehicles, Fiat's full share in Chrysler means that future Jeep production in China will naturally be done via the Guangqi Fiat joint venture.
It is worth mentioning that the Guangqi Fiat Guangzhou factory is located in an unused area of GAC Motor's passenger automobile factory. When asked about why this decision was made, GAC Group Acting Vice President and Guangqi Fiat CEO Feng Xingya gave the following answer: resource sharing. That resource sharing goes far beyond just sharing land. "Auto parts, logistics, product testing and inspection [are among the aspect that] will be shared with GAC Motor, with the ultimate goal being able to achieve cost-efficient production," Mr. Feng commented.
Aside from the above aspects, technology and research is certain to also be shared as Guangqi Fiat eventually develops own brand and new energy models.
This type of cooperation does indeed offer many costs advantages. One recent example is GAC Gonow's E Mei sedan, which was built on the same platform as the GAC GA3 and has gained the nickname of "an affordable version of the GA3". GAC Motor's own Trumpchi GS5 and GA5 platforms also come from the Guangqi Fiat joint venture, with auto parts able to be shared between both manufacturers.
As for which models the new factory will produce, Mr. Feng remarked that it will "first manufacture two global Jeep SUV models codenamed B-SUV and C-SUV." Some in the industry have speculated that the former may refer to the upcoming Jeep Renegade, while the latter may refer to a compact SUV following the same direction as the Jeep Compass or Patriot.
Both GAC and Fiat are aware of the promising future prospects for the SUV market in China. SUV sales in the country last year reached three million units, achieving year-on-year growth of 50 percent to become the country's most rapidly growing segment. Even those its models are subject to heavy import taxes, Jeep imports in China still grew 29 percent last year. One can only imagine the future development potential for the brand after domestic production begins.
Domestic production of Jeeps will also give GAC Group another source of income. As of now, over 90 percent of GAC Group's profits come from Guangqi Toyota and Guangqi Honda. As Sino-Japanese relations remain tense, relying solely on these partnerships may not be the most secure decision. It also allows GAC to balance between revenues coming from sales of Japanese, European and US brand models.
