Fiat is to spend US$263 million building a new commercial engine factory in Chongqing City, China, where Iveco already has a facility, which will likely make it the largest commercial vehicle and component production centre outside Italy.

Fiat is to spend 1.8 billion yuan (US$263 million) building a new commercial vehicle engine factory in Chongqing City, Western China, where Iveco already has a production facility (a joint venture between Iveco and domestic leader SAIC Motor producing heavy trucks), which will likely make it the largest commercial vehicle and component production centre outside Italy.

The investment by Fiat comes as the Chinese government seeks to give the region's economy a boost and incentives are expected to be part of the proposal. It also comes as Fiat embarks on a new strategy to make an impact in China, after disengaging itself from a loss-making joint venture with Nanjing Auto that has seen it fall well behind its European rivals.

Last year Fiat signed a 'Memorandum of Understanding' with Chery Automobile Co. and has plans to build the Alfa 159 in China. Fiat's target is to achieve sales of 300,000 units per year, in what is now the world's second-largest car market, by 2010 and its showroom relaunch got underway this week with the arrival of imported versions of the Grande Punto, Linea and Bravo. Around 30 dealerships will sell the three models.

The new Fiat Powertrain factory in Chongqing City plant will have an annual capacity of around 100,000 light diesel engines once it is fully up and running, with around 70 percent of the resulting production being earmarked for export overseas. The news was broken in a statement listed on the Chongqing Development and Reform Commission's website. Fiat isn't the only western carmaker to choose Chongqing as Ford has also been attracted by the region's low wage costs and government incentives; according to statistics the average annual income is around two-thirds that of Shanghai.