CHANGSHA: The Guangzhou Auto Group Co Ltd (GAC), a leading Chinese automotive manufacturer, and Fiat SpA, Italy's largest carmaker, have officially began construction of their joint venture facilities in Changsha, capital of Hunan province. The event was marked by a groundbreaking ceremony on November 26.

The Italian ambassador to China, the provincial leaders of Hunan and Guangdong, the city leaders of Changsha and Guangzhou, as well as the management of GAC and Fiat all attended the ceremony. Officials from two provinces, both of which are home to GAC's existing plants, spoke highly of the project and the close cooperation between the two provinces regarding projects within the automotive industry.

With a total investment of around 5 billion yuan, the new facility will have an initial annual production capacity of 140,000 cars and 220,000 engines and cover 700,000 sq m. The capacity will be ultimately increased to 250,000 cars and 300,000 engines per year.

The first locally produced model - the 1.4 liter Linea sedan - will roll off the production line in 2011. The Fire 1.4 liter turbo charge engine will be the first locally-made engine produced by the joint venture.

Back in July this year, the two parties signed a cooperation agreement in Rome during President Hu Jintao's State visit to Italy. Four months later, the National Development and Reform Commission officially approved the project. Construction work on the project begin immediately afterwards.

With an existing market focus on West Europe and Brazil, Fiat generated a revenue of 6.5 billion euros in the third quarter of this year and sold around 540,000 sedans and light business vehicles.

This was an increase of 4.3 percent over the same period of last year. At present, the company only sells small number of vehicles, all of them imported, in China. These include the Punto, Linea and Bravo.

Fiat sees the official endorsement of its joint venture as a vital step in its bid to access the booming Chinese automotive market through localized production.

Ten years ago, the company established a joint venture with Nanjing Automobile. This partnership was dissolved in 2007, when Nanjing Auto was taken over by the Shanghai Automotive Industry Corporation (Group).

For GAC, this new joint venture is its third cooperative agreement to produce passenger vehicles with overseas car manufacturers. It comes on top of its existing relationships with two Japanese carmakers -Toyota and Honda.

The company sold nearly 500,000 units between January and October this year. Its mid and high-class sedans, especially its Accord and Camry models, have already taken a lead in the segment. Analysts believe its cooperation with Fiat, a company renowned for successfully producing small cars, could help GAC improve its sales performance in this sector in China.

Six months ago, Guangzhou-based GAC acquired a 29 percent stake in the Hunan Changfeng Motors Co, headquartered in Changsha, and became the largest single shareholder in the company.

By the end of this year, the high-speed railway link between Guangzhou and Wuhan, passing through Changsha, will come on-line. It will reduce the time taken to travel the 600 km between Guangzhou and Changsha to just two hours.

This rapid transit system is set to be an essential asset for future development of the GAC-Fiat joint venture, according to Yan Jianming, a member of the GAC-Fiat project preparation group.

(China Daily 11/30/2009 page6)