Welcome back - and don't miss a thing!

Finally it is official: Fiat is back in China! The Italian car maker has just inked a contract with Guangzhou Auto for local passenger car and engine production in Hunan province. I think this is great news as I always thought that Fiat should fully exploit the growth potential of the Chinese car market in order to secure its own survival. Don’t forget that its passenger car branch was at the verge of bankruptcy until not long ago, and the firm’s previous engagement in the mainland with Nanjing Auto did not really go well, as it ended with Fiat’s departure from China 2 years ago.

The Italian car maker has visibly recovered in the meantime, even struck a deal to acquire Chrysler, and the China venture is perfectly fitting into Fiat’s ambition to become a strong global player. But it is really high time to have set the course now. Local production of Fiat models will only start in 2011, and this means that Fiat will have missed out four decisive years in the China car market’s development – important years to raise awareness among a broader and above all younger target audience, and crucial to build brands and customer relationships. In other words, Fiat has to make up “lost terrain” and step up its marketing efforts.

A first challenge lies in the collaboration with Guangzhou Auto itself, in that two pretty ambitious vehicle manufacturers come together. Guangzhou Auto has already been running partnerships with Honda and Toyota, and has begun activities to build its own brand. It has recently bought a stake in Changfeng Motors which underlines Guangzhou Auto’s determination to swiftly develop as an independent car manufacturer. One should remember that Nanjing Auto’s focus on own brand building (in the wake of the Rover/MG acquisition) at the alleged expense of the JV operations was one of the “divorce” reasons brought forward by Fiat a couple of years ago. It will be interesting to see how the cooperation will be handled this time – more successful, hopefully.

No less a challenge will be the choice of the new model line-up. As we understand, the ‘Linea’ will be the first model produced in the mainland. Unlike before, when Fiat banked on small vehicles such as Palio and Perla (in a market driven by medium-sized vehicles), the company opts now for a mid-sized family sedan, co-developed by its Brazilian and Turkish operations. The car maker counts on its experience in emerging markets which is supposed to be an advantage as long as Fiat’s managers remain aware that the nature of the various emerging markets is quite different, and successful operations in Brazil, India or Turkey do not automatically mean success in China. Exterior appearances and interior configurations have to be adapted to ensure optimal attractiveness to Chinese car buyers. In this context, it is recommended to quickly complement the product range with compact and medium sized 2-box models (Grande Punto respectively Bravo) to respond to the needs of the new, young consumer group who looks for trendy and fashionable but still affordable vehicles. Here, Fiat can be at its most impressive with its capability of styling good looking cars.

Going forward in China, Fiat does also have to make a decision about how to address the “new energy” issue. The year 2010 is supposed to open the period of time when most car makers – JV manufacturers as well as Chinese domestic brands – will launch their alternative energy vehicles on the Chinese market. At the same time, we can expect favourable measures by the government to facilitate the penetration of “green” cars. Then, being fuel efficient will probably be no longer sufficient by itself in order to ensure success in the long term. We didn’t hear too much about alternative powertrain activities neither from Fiat nor from Guangzhou Auto, though, and it would be a pity if Fiat would soon after its return to China fall behind its competitors again.

My wishful thinking therefore is that Fiat is, with its new mindset of global ambitions, in a stronger position than ever to face the challenges in China, manage its partnership with Guangzhou Auto most efficiently, and accelerate its marketing activities. Because then, despite a short absence from the most important market in the world, Fiat won’t miss a thing!