Fiat Building Cars in China Again

Fiat SpA has begun producing the Viaggio small sedan in Changsha, China, with partner Guangzhou Automobile Group Co. after two previous failed joint ventures. Fiat last made cars in China in 2007.

The venture's new plant in the central province of Hunan has annual capacity of 140,000 vehicles but could expand to 400,000 units at an unspecified future date. The Viaggio, which rides on the same platform as Chrysler's Dodge Dart, was developed specifically for the Chinese market.

CEO Sergio Marchionne reiterates that the factory may eventually produce unidentified Alfa Romeo and Jeep models. The facility also will produce 220,000 engines per year.

Fiat lags virtually every other foreign automaker in the Chinese market. The Italian company aims to boost its sales of locally made vehicles to 200,000 units by 2014 from fewer than 1,000 units last year. Fiat needs Chinese output to avoid the 25% duty on imported vehicles, and it needs sales in China to offset declining volume in Europe.

"We are showing up too late," Marchionne concedes. "It's my fault." He blames the collapse of Fiat's tie-up with Nanjing Automobile in 2007 on Fiat's decision to rely on an "antiquated structure" that produced models that were out of step with the Chinese market.

Fiat scrapped its two-year-old venture with Chery Automobile in mid-2009 before any cars were built. Soon after, the Italian carmaker agreed to the 50:50 partnership with Guangzhou.