Fiat JV with Guangzhou Auto not to make Fiat 500

Shanghai, July 14 (Gasgoo.com) The leading Italian carmaker Fiat signed an agreement with the Guangzhou Automobile Group last week to build a 50:50 joint venture facility in Changsha city, capital of central China's Hunan province, Chinese media reported.

The 700,000-sqm factory will be able to produce 250,000 cars and 300,000 engines annually when it begins production in 2011. The plant will focus on economy cars for the Chinese market like the Linea compact car. But the renowned Fiat 500 will not be introduced to the JV for production, while Italy-Chrysler will build and sell four versions of the tiny Fiat 500 in North America starting in 2011.

Fiat has committed EUR400 million in the venture that will hopefully give the carmaker a solid presence in the world's most promising auto market. International carmakers are hoping that growing Chinese auto sales will offset declining demand from traditional Western markets.

This is not the first time the company tried to move into the Chinese market. The company inked a JV deal with Nanjing Automobile in the past only to quit years later when the deal failed to bring in profits and the local partner decided to merge with SAIC Motor.

Fiat had been looking for a Chinese partner since it terminated a joint venture with Nanjing Auto in 2007. A separate project with China's largest domestic automaker, Chery Auto, has been put on hold since March.

Guangzhou Auto's president Zeng Qinghong said that Fiat's technology in the economy car segment had made it an attractive partner, adding that the new joint venture won't harm its existing operations with Japanese firms Honda Motor and Toyota Motor.