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Kandy Wong

Chery Automobile and Italian carmaker Fiat will establish a joint venture to produce and distribute cars, further cementing ties between the two companies.

Each firm will have a 50 per cent stake in the venture, set to start production in 2009 with an annual capacity of 175,000 cars.

The venture   will produce and distribute Alfa Romeo,  Fiat  and Chery branded  cars.

Fiat is seeking new partnerships in the mainland after expressing unhappiness over its tie-up with Nanjing Automobile Group. Chery, the nation's fourth-largest carmaker, earlier this week signed a contract to sell engines to Fiat.

Fiat China Zheng Xiaoli said investment in the joint venture was still under discussion and details would be disclosed later.

Chery will supply 100,000 1.6 litre and 1.8 litre petrol  engines annually to Fiat under the earlier agreement.

Fiat chief executive Sergio Marchionne has expressed his disappointment with Nanjing Automobile as the company  has focused on building self-branded cars  since acquiring assets from MG Rover in 2005.

Nanjing Fiat produces models such as the Perla, Palio, Siena and Weekend in the mainland. The joint venture sold about  300,000 vehicles last year.

Mr Marchionne said expanding in the mainland market was a key goal for the company while Chery Automobile president Yin Tongyao said the co-operation with Fiat would enhance the competitiveness of Chery internationally.

Chery aims to increase its exports by 75 per cent this year from 40,000 units last year.  It hopes to boost the appeal of its brand domestically by establishing a presence in markets in Western Europe and the United States.

Chery is set to become the first mainland carmaker to sell vehicles in the US by developing and assembling  small and subcompact cars for Chrysler  under an agreement sealed  last month.



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