Fiat's rocky road

By Yu Qiao (China Daily)
Updated: 2010-04-24 06:53

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Analysts believe the failure of Fiat's joint venture in Nanjing was due to slow response to customer needs, lack of recent models and conflicts with its partner Nanjing Automobile. Jing Wei / for China Daily

As it sits out the Beijing show, carmaker wrangles to make new joint venture work

Beijing: Fiat Auto is one of the very few global car company no-shows at the 2010 Beijing International Automotive Exhibition that opens to Chinese customers on Sunday.

It is the third time the Italian carmaker has missed a major auto show in China, following its absence at Shanghai motor show in April last year and the Guangzhou exhibition in November.

Yet Fiat will not be watching its competitors' performances during the Beijing gala.

Instead it is concentrating on how to restart production after it ceased making cars in China nearly two years ago.

"Joining motor shows is a matter of marketing and sales. But we are now concentrating on pressing ahead with our new joint venture project in China," said a source from Fiat Auto's China operation, who asked not to be named.

Last July, Fiat reached an agreement with Guangzhou Automobile Industry Group Corp to form a joint venture in the central city of Changsha. The deal came after the Italian carmaker's 2007 withdrawal from its joint venture with Nanjing Automobile Corp in east China.

With a total investment of 400 million euros ($543 million), the new tie-up will have an initial production capacity of 140,000 cars, which could be expanded to 250,000 units a year. The venture will start to build Fiat cars next year. Its model will be Fiat Linea compact sedan.

But the project seems far from smooth.

Although foundations for the joint venture's new plant were laid in November, there's still no sign of significant construction at the site.

The main reason for the delay, according to sources with knowledge of the matter, is that Fiat is still in tough negotiations with Guangzhou Automobile on a range of issues including introduction of new models and internal management of their joint venture. The plan for the project will possibly be adjusted, sources said.

Recent media reports said Fiat is considering bringing Chrysler models into the joint venture to expand its local line-up to lure Chinese buyers. Fiat acquired Chrysler last June.

Fiat is now exporting several compact models to China such as the Linea, Grande Punto and Bravo, but their sales figures are tiny.

The company's China sales dipped by 62.5 percent to just 454 units last year, according to market data.

The figure is negligible compared to other carmakers with massive local production. Volkswagen, the biggest overseas passenger car producer in China, sold more than 1.4 million autos in the country last year, up 36.7 percent.

Analysts said no matter how Fiat's new project might change, the Italian carmaker must have a clear and considered strategy for China - in addition to learning how to handle Chinese partners and customers - if it wants to rebound in the world's biggest vehicle market.

At the end of 2007, Fiat pulled out of its joint venture with Nanjing Automobile due to many years of sluggish sales and losses despite the surging overall market.

Analysts blame the failure on its slow response to customer needs, the lack of competitive products and wrangles with Nanjing Automobile.

In the failed joint venture's eight-year lifespan, it only had three older models - the Palio subcompact, and Siena and Perla compacts. The partnership changed its president four times and replaced its sales and marketing chief seven times over the period.