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Fiat Touts Style as it Returns to Chinese Automotive Market

Nov. 21, 2012
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."

Appreciating the 'Next Marriage'

Fiat exited a joint venture with Nanjing Auto in 2007 after falling out with its partner over its vehicles' disappointing sales.

Once it made the strategic decision to return to China, it found a new partner, Guangzhou Automobile Group Co. (GAC), and designed the car in 18 months. Production began in June and sales in September.

GAC needs Fiat too after it saw a 60% fall in third-quarter profits. as buyers shunned the Japanese-brand vehicles it produces with Honda Motor Co. (IW 1000/30) and Toyota Motor Corp. (IW 1000/8). One of its previous joint ventures, with French auto group PSA Peugeot Citroen (IW 1000/47), also failed in 1997.

"If you get divorced, you will appreciate your next marriage and we both are," said Cheng.

With European auto sales falling, China represents a major potential market, said Fiat CEO Sergio Marchionne.

"In China, now the world's largest single car market, they're still experiencing phenomenal growth and demand," he told an industry conference in Shanghai last month.

"It's going to give an opportunity to a lot of people ... I just want Fiat-Chrysler to participate."

The GAC Fiat plant in Changsha, in the southwest, currently has an annual output capacity of 140,000 vehicles and the company hopes to lift it to 300,000 units, producing four different vehicle bodies.

But other foreign companies -- including General Motors Co. (IW 1000/12) and Ford Motor Co. (IW 1000/19) -- have been in China uninterruptedly since the 1990s.

In the first 10 months of this year, GM sold 194,357 Chevrolet Cruzes in China and Ford sold 221,130 Focuses -- both of which compete with the Viaggio.

Copyright Agence France-Presse, 2012

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