Fiat starts construction of car plant in China

Guangzhou Automobile Industry Group and Italy's Fiat SpA started the construction of a 5-billion-yuan ($733 million) passenger car plant in China yesterday.

The new GAC Fiat facility, first announced in July, represents the Italian car maker's return to the Chinese auto market after it ended eight years of cooperation with Nanjing Auto in 2007 due to a failed partnership.

Located in Changsha, capital of Hunan province in central China, the equally owned car production joint venture will produce 140,000 vehicles and 220,000 engines annually in the first phase.

The first model to be produced will be Fiat Linea mid-class sedan as well as Fiat's 1.4-liter turbo engine when production starts in 2011.

The car maker, which formed a strategic partnership with Chrylser LLC globally, said the Chinese passenger car project is an important move in its global strategy.

"It would be impossible for Fiat to rapidly achieve a large market share merely depending on its small cars, where the segment is highly competitive," said Wang Liusheng, an auto analyst from Merchants Securities Co.

"The reborn of Fiat in China will also involve brand-building and setting up dealerships," he added.

With a limited product portfolio, the Italian car maker lost its direction in China, where soaring vehicle sales boosted the profits and sales of major global car makers, including General Motors Corp and Volkswagen AG.

The maker of Alfa Romeo cars and Ferrari sports cars has three imported vehicles in the Chinese market now.

By teaming up with Fiat, Guangzhou Automobile wants to accelerate the development of self-branded vehicles using Fiat's technology.