Reports circulating in the last few days suggest that the long-running negotiations between Chinese carmaker, Chery Automobile, and Fiat Group Automobiles could result in an agreement to build several Alfa Romeo models in China being signed as early as this coming week. National Chinese media outlets, as well as reputable international sources including Automotive News, are suggesting that a deal has now been done.

The Alfa 159 sedan is expected to be this first model to be built in China, to be swiftly followed by the Alfa 147 hatchback. Initially the production will be targeted at the rapidly-growing Chinese new car market where Alfa Romeo's sporty model range is currently only available by special order. The two models would initially arrive at Chery's factory in CKD format for assembly but plans have been put into place to progressively increase locally-sourced content. The engines will be sourced from Chery's new ACTECO family. This would be one of two proposed new Alfa Romeo plants located outside Italy: subject to the success of Alfa Romeo's return to the United States, the Italian firm has longer-term plans to establish a North American factory.

Fiat Group Automobiles has struggled to tap into the rich potential offered by the Chinese market and its long-running joint venture with Nanjing Auto to build Fiat branded models in China has had a very difficult path. Despite the arrival of the first model, the Perla, to be specially-tailored for the Chinese market last summer sales of locally built Fiats in China are down by a third this year compared to 2006. Conflicting reports suggest Fiat is either about to end its relationship with Nanjing or that the two have patched up their differences.

With the problems at Nanjing Auto well documented - into the picture has come Chery Automobile. Chery is China's biggest and most ambitious carmaker, with plans to use its large domestic market share as a springboard into it becoming a global brand. Chery Automobile Co Ltd was founded in 1997 in the city of Wuhu, in China’s Anhui Province. Currently government owned it, is set to be privatised soon. Chery's first car in 1999 was based on the SEAT Toledo. SAIC - one of China's other major automotive powerhouses and another one with global pretensions bought a 20 percent stake in Chery some years ago and there has been much talk that the two could eventually merge to create a company that would dominate the domestic scene and provide a platform for a worldwide roll-out.
 

Chery has developed complete product lines, and the company’s own R&D projects have enabled the development and production of vehicles, engines, gearboxes and other core vehicle components. So far, Chery has introduced six types of car onto the market, the Eastar, Tiggo, A5, Cowin, V5, and QQ. The present production capacity for whole vehicle and gearboxes stands at respectively at 400,000 and 300,000 units per year. In 2005, Chery achieved a sales volume of 189,100 cars with a total annual increase of 118 percent, and exported 18,000 cars overseas making it the biggest exporter of domestically made cars. Chery was the first Chinese carmaker to export cars when it started shipping to Syria in 2001. By the end of last year annual production volume had climbed to over 300,000 units.

Meanwhile, Chery is presently engaged in a number of R&D projects in anticipation of introducing a number of brand-new models within the short future. As a staged company target Chery expects to produce more than one million cars by 2010, and enhance its exportation share to 40 percent of Chery's total sales volume. Chery also has factories in Iran, Russia, Malaysia and Egypt. Last month Chery signed an agreement to build cars for export to the Asia on behalf of UK carmaker Chrysler.

In November last year Chery kicked off its relationship with the Fiat Group after signing an agreement to provide the Turinese carmaker with 100,000 1.6- and 1.8-litre engines a year for both domestic and internationally-built Fiat models, with both parties stating that the plans could soon be widened in their scope. This engine range, the ACTECO family, was launched by Chery in October 2005, and they are line with leading European technology. It signals the first generation of engines developing in China. Chery produces many different engines with displacement ranging from 0.8- to 4.0-litre. The products include in-line engines and V-type engines; gasoline engines and diesel engines.