Fiat Starts New Joint Venture in China

The ever-expanding Fiat announced on Monday that it will partake in a 50-50 joint venture in China with the Guangzhou Automobile Group, building cars and engines for the Chinese market.

The move comes as Fiat CEO Sergio Marchionne seeks to create an increasingly global company, predicting that in a few years’ time, the auto market will consolidate into only a few major global players. Together with Guangzhou, Fiat will build a 173-acre plant in Changsha, the capital city of the south-central Hunan province. The plant will cost more than $556 million, with production beginning in late 2011.

The plant could have eventually have the capacity to build 250,000 cars and 300,000 engines a year, but will initially make up to 140,000 cars and 220,000 engines per year. Fiat says the plant will make fuel-efficient, low-emissions vehicles (the Fiat 500 comes to mind).

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, has been put on hold since March.

Guangzhou Automobile Group is a state-owned holding company with 2008 revenue of about $16 billion (compared with Fiat’s $83 billion). The Chinese company already has joint ventures with two major automakers: Honda and Toyota. It reported sales of about 530,000 cars last year.

Chinese automakers have been eager to break out of their domestic market and access the lucrative European and American markets. Beijing Automotive Industry Holding (BAIC) is currently in talks with GM to purchase the American automaker’s European operations, which include the Opel and Vauxhall brands, and Geely is reportedly to buy Ford’s Volvo division.

Source: The Detroit News