GAC signs deal with Fiat, Chrysler to build Jeeps in China

Updated: 2013-01-16 11:34

By Michael Barris in New York (China Daily)

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Guangzhou Automobile Group has signed an agreement with Fiat SpA and the Italian auto maker's Chrysler Group LLC to expand vehicle manufacturing in China including the Jeep sold in that market, the companies announced on Tuesday.

The companies said their deal was signed at Chrysler's headquarters in the Detroit suburb of Auburn Hills, Michigan, during the North American International Auto Show.

A joint venture involving GAC, Fiat and Chrysler builds the Fiat Viaggio and distributes models such as the Fiat 500 subcompact, Freemont and Bravo in China. Production of more Fiat models is planned under the "framework agreement" announced on Tuesday.

According to the three, the venture will begin producing Jeeps in China for the domestic market. Various Jeep models are already sold in China, including the Grand Cherokee, Wrangler and Compass, but all are imported.

"This agreement is another milestone of our partnership with Fiat and Chrysler Group," GAC General Manager Zeng Qinghong said in a statement. "It definitely creates the basis for our JV to reach very ambitious objectives in the Chinese market."

Details about which Jeep model might be built, or when, were not disclosed. After GAC's announcement on the sidelines of the Detroit auto show, however, Zeng told reporters it was hoped that production will begin next year. He said increasing demand for Jeeps is expected.

Mike Manley, president of Jeep and Asia-Pacific chief operating officer for Fiat, was quoted by the Detroit Free Press as saying he expects production to begin by the end of 2014.

In announcing the deal, Manley had said in a statement that "expansion of the agreement with our GAC partners will allow us to unleash the potential of both our Fiat and Chrysler Group brands in China".

Aaron Foley, associate editor of Detroit-based WardsAuto, an industry-information website, said the appeal of Jeeps to Chinese buyers is part of a trend toward luxury and premium brands.

"The Grand Cherokee is Jeep's top-of-the-line SUV and does well in China," Foley told China Daily. "But Jeep needs an entry-level vehicle for non-premium buyers. Rather than import entry-level vehicles from the US, it makes more financial sense to build and distribute in China.

"Because Fiat already has an existing agreement with Guangzhou, both companies benefit now that this partnership has been expanded to include Jeep."

As the majority owner of Chrysler, Fiat is looking not only to expand Chrysler's brand portfolio worldwide, but also to boost the Italian company's own profits, Foley said. Given the weak European market, "the chance to develop in China allows Fiat to expand in Asia" and develop Jeep as a global brand.

At the Detroit show on Tuesday, GAC officials showed three of the company's vehicles now built under its Trumpchi brand, but Zeng said there are no plans to sell those in the US.