Italian carmaker Fiat Auto has recently signed an agreement with China's Guangzhou Auto Group for technical cooperation. Meanwhile, Fiat Group has decided to invest 1.8 billion yuan ($263 million) to build a light diesel engine plant in Chongqing city. All this shows the determination of Fiat to maintain its presence and growth in the fast-growing China market.
"Our current cooperation with Guangzhou Auto is limited only to the technical level and our major mission is to help the Chinese carmaker develop its own-brand models," said Paolo Arpellino, chief representative of Fiat's China operations. Further cooperation between Fiat and Guangzhou Auto, such as setting up a joint venture or doing the OEM project, will need more talks and will also depend on the progress in Fiat's joint venture negotiations with another Chinese carmaker Chery Auto.

The light diesel engine project of Fiat Powertrain Technologies (FPT) to be built in Chongqing will be the largest overseas auto-parts facility of Fiat. The project is planned to have investment of 1.8 billion yuan from Fiat and will produce 100,000 engines annually, 70% of which will be exported. The engines for export will have components supplied by SAIC Fiat Powertrain Hongyan Co, a joint venture between SAIC-Iveco Commercial Vehicle Company, Fiat Powertrain Technologies and Chongqing Municipality.

Previously, Fiat Group and SAIC had jointly invested 4.7 billion yuan to establish SAIC-Iveco Commercial Vehicle Company and SAIC Fiat Powertrain HongYan Company as joint ventures for making heavy trucks and engines.

Fiat terminated its joint venture with Nanjing Auto at the end of last year and its Nanjing facility was bought up by SAIC along with the Nanjing carmaker in early 2008.

Before it secures any new joint venture or OEM project in China, Fiat has re-entered China's passenger vehicle market by selling the imported Fiat cars. On August 21, Fiat launched its three imported models -- Bravo, Linea, and Grande Punto onto the Chinese market, with their prices ranged 148,800 yuan to 219,000 yuan.

The imports of Fiat models to China will consolidate the Italian carmaker presence and profit in this fast-growing market. And this will improve the Fiat brand image and help Fiat find new partners in this booming country. However, it will be a huge challenge for Fiat to locally produce its authentic Fiat cars as the imported ones in China to meet the needs of increasingly demanding Chinese customers.

To survive the fierce competition in the Chinese auto market, all global automakers must have three driving factors behind their success: strong local carmakers as their partners, introduction or local production of a series of vehicle models with precise market orientation, and competitive supply system in the country.

Fiat should learn lessons from its joint venture with Nanjing Auto. If its local production of the key auto-parts, among others, had been high, the venture might be still operating smoothly now. Plus, the powerful strength and support of their local partners will largely determine the success of global carmakers in China, as proven by the achievements of General Motors, Toyota, and Volkswagen. 

Its choice of a strong and supportive partner in China will surely push Fiat into the fast lane to its recovery and growth in China. We believe that Fiat will be restored to its former glory on Chinese soil before long.