Italian carmaker Fiat Auto and China's Chery Automobile are in talks to form closer ties following an engine deal last October.One option for the two companies is to form a joint venture in China to assemble Fiat cars.
Chery will register a new subsidiary to team up with Fiat in an attempt to remain an independent brand.
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. 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.
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