Italian automaker Fiat SpA is returning to China five years after a failed joint venture, but now faces entrenched competition and slowing growth in the world's biggest auto market.
SHANGHAI -- Italian automaker Fiat SpA (IW 1000/48) is returning to China five years after a failed joint venture, but now faces entrenched competition and slowing growth in the world's biggest auto market.
Fiat, which became the world's seventh-largest automaker after taking a majority stake in Chrysler when the troubled U.S. firm emerged from bankruptcy in 2009, has been conspicuous by its absence from the critical Chinese market.
But the first sales of its new Viaggio, a compact produced at a $790 million joint-venture plant in Changsha city, come as China's economy stumbles and cities slap limits on vehicles over pollution and congestion.
Fiat-Chrysler's very presence in China also set off a political storm in the recent U.S. presidential election, after Republican candidate Mitt Romney ran an attack ad implying that the automaker would export American jobs.
But the company says future plans to build Jeep-brand sport-utility vehicles in China are an expansion, not a transfer of operations.
In the first 10 months of this year, China's passenger-car sales rose 6.9% from a year earlier, to 12.6 million vehicles.
The increase was a far cry from the 33% rise in the whole of 2010, although slightly up on last year. Consultancy McKinsey on Wednesday forecast average growth of 8% a year until 2020 -- down from a 24% average over 2005-2011.
"It's really high time that Fiat has come back and launched a locally manufactured model," said Klaus Paur, Shanghai-based global head of automotive for the market-research company Ipsos.
"You need to be in China. If you are not here, you are losing out completely."
Fiat will have to build a name for itself among Chinese consumers, set up a dealership network and introduce new models to compete against other established foreign players, he said.
The Viaggio is priced at $17,300 to $25,200 to lure buyers in the market's most hotly contested segment.
"Italian design is something that really differentiates us," said Bob Graczyk, commercial director for the joint venture GAC Fiat Automobiles Co. "It's of course very competitive, but there's plenty of room for the Viaggio."
Jack Cheng, GAC Fiat general manager, added: "Our first priority is to get the Fiat right. If we don't get it right, we don't even have a future -- that's it."
