Fiat eyes faster expansion by forming partnership with Chery

Italian automaker Fiat, announced its plan to form a joint venture with Chery Automobile after being disappointed by its first Chinese partner Nanjing Automobile Corp. The company hopes to achieve fast business expansions in China by working with another partner.

The two sides signed a memorandum of understanding yesterday. According to the MoU, the joint venture will start operation in 2009 in Wuhu of Anhui province, where the Chery headquarters is located. The joint project is designed to turn out 175,000 vehicles annually. The facility is also expected to be able assemble other car models owned by the two companies, like Fiat, Alfa Romeo.

The two companies have also signed an engine supply deal, which requires Chery to supply more than 100,000 1.6L and 1.8L petrol engines to Fiat cars assembled worldwide.

Fiat entered China by setting up a 50-50 JV with Nanjing Automobile Corp in 1999. However the cooperation with NAC ended up disappointing to Fiat. Last year, Nanjing Fiat put out 30,000 units, which makes Fiat’s goal of the 300,000-unit-by-2010 in China "a mission impossible".

Fiat started negotiation of cooperation with Chery last year.

Chery has completed a deal with Chrysler to assemble cars in China and sell them to North American and European markets under Chrysler brands.
"It's a big progress," said Yin Tongyao, president and general manager of Chery, adding that Chery's international competitiveness will be greatly increased.

Sergio Marchionne, chief executive officer of Fiat, said in a statement that tie-up with Chery represents a "milestone" for Alfa Romeo's global expansion and will facilitate development of Fiat's brand in China.