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Fiat will introduce new car in JV with Guangzhou Auto

By Li Fangfang (China Daily)
Updated: 2009-08-31 16:15

Italian carmaker Fiat SpA is directing its ambitions toward the world's biggest automobile market as the market slows down in Western countries.

Even though most major automakers already have stabilized their foothold in China, "Fiat is not a latecomer," said Franco Amadei, chairman of Fiat (China) Group

This month, the company introduced its new automatic transmission Fiat Bravo car model to the China market.

The car is equipped with the advanced transmission technology Dualogic, which can lower fuel consumption by 15 percent.

Fiat has two other imported models in the China market, Punto and Linea.

Paolo Arpellino, chief representative officer of the Chinese operations of Fiat Group Automobiles, declined to discuss the company's sales performance in China, but said he is satisfied with it.

"China is Fiat's most important strategic market," Arpellino said.

"We hope Chinese consumers can experience our Italian design and energy efficient technologies through our imported models first," he said.

Arpellino told China Business Weekly that Fiat's strategy includes further developments in its imported car segment and also in local production.

Joint venture

Fiat Group and Guangzhou Automobile Group Co Ltd (GAC) signed a framework agreement during President Hu Jintao's official visit to Italy last month.

Related readings:  Fiat 'must learn from past mistakes'  Partners on road to producing China Fiat  Fiat joint venture among 9 deals inked  Fiat signs joint venture with China's Guangzhou Auto

The agreement establishes a 50-50 joint venture for the production of cars and engines for the Chinese market.

If the Chinese government says yes to the agreement, it will become the first passenger car production joint venture the government has approved in three years.

"The localization is expected to perfect Fiat's global strategic expansion, as we cannot ignore the business in the world's biggest auto market," Arpellino said.

For the past seven months, China sold more vehicles than the United States, surpassing the US to become the world's No 1 auto market.

Although Fiat has to wait more than two years for the first locally produced 1.4-liter Linea car to roll off its Chinese production lines, Amadei said that Fiat will continue to expand its presence in other ways.

Dealerships

"We are preparing a national dealership network for the coming Linea car," Amadei said.

Fiat has 30 dealerships in Beijing, Shanghai, Suzhou, Hangzhou, Wenzhou, Nanjing and Chengdu currently.

With an investment of 400 million euros and a production area of 700,000 sq m in size, the GAC-Fiat joint venture is located in Changsha, the capital of Hunan province.

Changsha is a major road and rail hub in the heart of south-central China, approximately 600 km north of Guangzhou, to which it will be connected within a couple of years by a high-speed rail link.

Upon completion of the first phase of development, the joint venture will have a production capacity of 140,000 cars and 220,000 engines per year.

Plant capacity could subsequently be increased to a maximum of 250,000 cars and 300,000 engines per year, according to Fiat.

The models produced will be equipped with advanced engine and transmission technology in response to the Chinese government's requirement to develop fuel-efficient, low-emission vehicles.

This industrial project is also eligible to receive support from the development plan recently established by the Chinese government to promote new investments in six provinces in central China.

Small cars

"Fiat is good at providing small cars, which follows the purchasing trend in China due to climbing fuel prices and the government's incentive policies," said Yale Zhang, director of Greater China Vehicle Forecasts for the US auto industry consulting firm CSM Worldwide Corp.

According to the GAC-Fiat agreement, GAC Group can also acquire Fiat's technology and parts support on its self-developed products.

This could help GAC achieve its target of selling 1.3 million vehicles and reaching 200 billion yuan in revenues in 2010.

The Italian automaker failed in a joint venture project two years ago when its partner, Nanjing Auto, was taken over by Shanghai Automotive Industry Corp (SAIC) Group.

Nanjing Fiat, the 50-50 venture founded in 1999 with a total investment of 3 billion yuan, on average sold fewer than 30,000 cars annually and operated in the red from 2003 to 2007.

Fiat only produced three models - the Palio subcompact, and Siena and Perla compacts - in its Nanjing venture.

"We believe Fiat can better communicate with GAC Group, which also experienced joint venture failure before (with French Peugeot)," Amadei said.

"More important, GAC Group is the most successful automaker in the China market in recent years as the one with the highest profit margin, the same as Fiat in Europe," Amadei said.