Italian carmaker Fiat Auto and China's Chery Automobile are in
talks to form closer ties following an engine deal last October,
according to an industry source familiar with the situation.
One option for the two companies is to form a joint venture in
China to assemble Fiat cars, said the source, who did not wish to
be named.
"Chery will register a new subsidiary to team up with Fiat in an
attempt to remain an independent brand," the source said.
Chery, owned by the government of Wuhu in East China's Anhui
Province, signed a memorandum of understanding with Fiat in October
to supply the Italian firm with 100,000 engines for cars built both
in China and overseas.
Chery executives and government officials from Wuhu confirmed
the two parties are discussing further cooperation. But they
declined to provide details.
Zhan Xialai, Party secretary of Wuhu, last month told China
Daily: "Fiat made overtures to us for additional
cooperation."
"However, we will not give up the Chery brand, whoever we
collaborate with," Zhan said.
Last month, Chery agreed with US carmaker Chrysler to make cars
in China for the North American and European markets. Chery has
been one of the flagship Chinese car brands and the nation's top
car exporter in recent years with low-cost products and improving
design and quality.
The company announced last month it aims to sell at least
393,000 cars this year, up from 305,000 units in 2006. Meanwhile,
it expects to boost exports to 70,000 units from 50,000. Chery also
aims to sell a total of 1 million cars at home and abroad a year by
2010.
Song Bingshen, an auto industry analyst with CITIC China
Securities Co, said Fiat is seeking a tie-up with Chery mainly
because of its weak performance in China, the world's No 2 vehicle
market.
Fiat now makes the Palio and Siena subcompact cars and Perla
compact sedan at a venture with Nanjing Automobile Corp in East
China's Jiangsu Province.
However, the venture, set up in 1999, has seen sluggish sales
and losses in recent years due to internal wrangles and a lack of
competitive products.
It sold 30,700 cars last year, down 7 percent from 2006,
according to industry data. In the meantime, sales of China-made
vehicles grew by a quarter to 7.22 million units with that of
passenger cars surging 35.6 percent to 4.26 million units.
"Fiat seems unsatisfied with its partnership with Nanjing
Automobile. So it hopes to find a new partner in China," Song told
China Daily.
"It could take advantage of Chery's low costs and improving
quality if they team up," he added.
Many global automakers, such as General Motors, Volkswagen,
Toyota and Honda, have two car joint ventures in China with
different local partners.
And Nanjing Automobile appears to be shifting to its acquired
British brand, MG, in the passenger car area.
The company said on Tuesday it would begin making an MG sedan in
March at its base of Nanjing, and an MG sports car in May in
England.
It plans to assemble a total of 200,000 MG vehicles at the two
locations annually within the next five years.
(China Daily February 1, 2007)