Nanjing Fiat Automobile Co, Chinese-Italian car joint venture, is planning to foray into overseas markets to boost sales as its wrangling shareholders have yet to work out an overall rescue plan. The 50-50 venture, held by Nanjing Automobile Corp and Fiat Auto SpA, told China Daily that it had received overseas orders for 8,300 cars to be delivered this year and in 2008. The orders include 8,000 units from Fiat's Brazilian division, which has insufficient production capacity to meet growing demand in the country and other parts of South America and 300 from buyers in Egypt, it said.

Nanjing Fiat said it is just the start of its ambitious overseas goals, mainly targeting South America and the Middle East.  "We will have a much bigger plan for 2010," it said, without elaborating. The venture is also in talks to sell cars in Central America, Vietnam and Mongolia, it added. Its export drive came as the company has been suffering sluggish sales and losses in recent years amid blistering growth of China's passenger car market.

The venture, which is making Fiat's Palio and Siena subcompacts and Perla compact in the eastern city of Nanjing, only sold 10,817 cars in the first half of this year in the domestic market, plunging one-third from a year ago, according to industry data. Yet sales of all China-made passenger vehicles jumped by 22.3 percent to 3.08 million units at the same time. The venture's hardship is widely blamed for serious disputes between its two parents - Nanjing Automobile and Fiat - over numerous issues and the lack of new competitive models. Over the past five years, for example, the venture changed its marketing and sales chief seven times. Yale Zhang, the Shanghai-based director of Greater China Vehicle Forecasts for US consultancy CSM Worldwide Corp, said: "It's always good to have new markets and extra sales. However, to export is more of a tactical decision for Nanjing Fiat." What the company really needs is "something more comprehensive and strategic" to solve its internal problems, Zhang said.

Agreeing with him, Zhang Xin, an auto analyst from Guotai & Jun'an Securities Co in Beijing, said the overseas market will not help the venture turn around in real terms. "It will have to grab a slice of the domestic market with competitive products if it wants to survive," Zhang Xin said.
 

Commenting on wrangles between Nanjing Automobile and Fiat, he said it's "very natural" that shareholders of Chinese-foreign car joint ventures disagree on many things under a government-formed 50-50 equity structure. "Disagreements could be covered if joint ventures enjoy strong sales and good margins. But Nanjing Fiat is an exception," he added. Other global automakers, such as General Motors, Volkswagen, Toyota and Honda, have set up 50-50 partnerships in China with local partners.

There is an indication that Nanjing Fiat's two parents will compromise and create a revival plan for it soon. Both Nanjing Automobile and Fiat will reportedly add 3 billion yuan in the venture. Andrew Humberstone, Fiat Auto's chief representative in China, said on June 29 that it would make the Linea and Grande Punto next year and the Alfa Romeo later in the country as part of efforts to raise its local sales to 263,000 cars by 2010 from 32,000 units last year. But Humberstone declined to reveal who will be the partners for production of the models.

At the same time, Fiat is seeking a second partner to facilitate its expansion in the world's second-biggest vehicle market. It is reported that the Italian carmaker will assemble its cars with Chery Automobile Co, an emerging indigenous carmaker in Wuhu, a smaller city 100 kilometres southwest of Nanjing.

Despite an expected turnaround plan for the venture with Fiat, Nanjing Automobile is shifting much of its efforts to its own car project under the acquired British brand MG. The loss-ridden Chinese group plans to build an annual production capacity of 200,000 MG cars, 250,000 engines and 100,000 gearboxes in Nanjing with a bank loan of more than 3 billion yuan. The Nanjing-based MG cars will go on sale in China later this year.

Report courtesy of China Daily