Zastava is currently in discussions with Fiat Auto about setting up a second model assembly line - alongside the outgoing Fiat Punto model - in Serbia under licence. The news was revealed this week by the Serbian Minister of the Economy Predrag Bubalo after he held talks with Romano Smirnov, Fiat's representative.

A statement issued on Wednesday revealed that Fiat Auto is receptive to the idea of Zastava assembling a second Fiat model under licence at their factory in Kragujevac. It added that Romano Smirnov had commended the efforts being made by Predrag Bubalo and the Serbian Ministry of the Economy in resolving the long-standing problem of the debts to Fiat Auto which are still outstanding, an issue that has somewhat clouded the recent rejuvenation in relations between the two carmakers.

Zastava has been selling the third series Fiat Punto model in Serbia since late last year, badged as a 'Zastava 10', reviving a long tradition of assembling Fiat's under licence in the Balkan nation.
 

The first 7,000 Zastava 10 models, all the 60bhp 1.2-litre petrol version, are being built in Italy, with Serbian workers now receiving training on the assembly lines, before production switches to Zastava's Kragujevac factory later this year. They are currently spending 15 million euros preparing the factory for the switch. Initially production will run a 500 units per month with an eventual figure of 18,000 units per year being targeted.

Neither party has discussed which model would be targeted for assembly in Serbia, although rumour suggests that the Fiat Stilo is the favoured option. The Stilo is winding down production and will be replaced by an all-new model early next year. The Serbian market is believed to be very receptive to a new, cost-effective C-segment model.