BEIJING -
Chery Automobile, the No 7 Chinese auto group by
first-half sales, says it has signed a memorandum
of understanding with Italy's Fiat to form a joint
venture to make cars under both badges for the
Chinese market.
The 50-50 venture, to be
located in the eastern city of Wuhu, Chery's home
base, will start building and marketing cars under
the Fiat, Alfa Romeo and Chery names in 2009, with
an annual production of 175,000 units, the Chinese
car maker said.
But it hasn't revealed how
much the two parties will spend on the
venture or what specific
models will be introduced, saying the project
still needs government approval.
The move
came after the Chinese firm and Fiat announced on
Monday that they had finalized an engine-purchase
deal, enabling the Chinese car maker to supply
more than 100,000 1.6- and 1.8-liter gasoline
engines per year for Fiat cars assembled in China
and abroad.
Last month, Chery also struck
a deal with Chrysler to assemble cars in China
bearing marques from the US car maker for the
North American and European markets.
Li
Chunbo, an auto analyst with CITIC Securities in
Beijing, said Chery, which has been staunchly
independent in the past, will benefit a lot from
the collaborations. "These tie-ups will greatly
help Chery boost its development, sales and
profits," Li said.
Chery plans to raise
its annual sales to 1 million cars by 2010 from
more than 400,000 units expected this year.
Its sales in the first six months of this
year jumped by 43.6% to 207,100 units.
Teaming up with Chery should give Fiat,
which has seen sluggish China sales in recent
years, a boost in the world's second-biggest and
fast-growing vehicle market.
Sergio
Marchionne, the Italian car maker's chief
executive officer, said in a statement that the
deal with Chery represents a "milestone" for Alfa
Romeo's global expansion and will facilitate
development of Fiat's brand in China.
Fiat
said last month that it aims to boost China sales
to 263,000 cars a year by 2010 from 32,000 units
in 2006, and will introduce a slew of new models
into the country in coming years, such as the
Linea, Grande Punto and Alfa Romeo 159.
But analysts said the tie-up with Chery
will be a blow to Fiat's already fragile
partnership with another Chinese auto maker,
Nanjing Automobile.
Fiat started making
its cars at the venture with Nanjing Automobile in
2001. But the venture has been in the red for
years because of poor sales.
Sources
familiar with the situation said Fiat might pull
out of the venture after its sales tumbled by
one-third to 10,817 cars in the first six months
of this year.
Sales of all China-made
vehicles surged by 23.3% to 4.37 million units,
according to industry data.
Full-year
sales are forecast to hit 8.5 million units, up
from 7.22 million in 2006.
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