Guangzhou Automobile already has sevral successful joint ventures with Japanese carmakers Toyota and Honda in place and amongst the models it manufacturers in China are the Toyota Camry (top), Toyota Yaris (middle) and Honda Jazz (bottom).

According to Chinese media reports over the weekend Fiat and Guangzhou Auto (GAIG) have reach an agreement for the Research & Development of compact cars in China. The two carmakers have been talking since last October, initially GAIG had been looking to buy the redundant production lines from the failed Nanjing Fiat joint venture as well as being interested in the lines of the former Italian built Alfa Romeo 166 and Lancia Lybra models, however with Fiat urgently casting round for a new partner in China talks quickly progressed towards a joint venture.

In March it was reported that a deal had been done between Fiat and GAIG and executives had been selected. However with the global financial downturn biting carmakers hard and offering an uncertain future as well as Fiat's focus on developing an alliance with Chrysler LLC in North America meant that it was expected that Fiat would be unwilling to commit themselves to the project. The new proposal now has to be presented to the Chinese government for approval but the local media foresees this as being merely a formality.

Guangzhou Automobile Industry Group Co., Ltd. was founded on June 8th, 2000. It is authorized by Guangzhou Municipal Government to operate state-owned assets. Benefiting from the sustainable and fast development of Chinese automotive industry, in 2007 GAIG realised a sales volume of 510,000 vehicles and 890,000 motorcycles with a sales income of 108.8 billion RMB and a tax and profit of 21.9 billion RMB, Thus, GAIG has become the four biggest large-scale automotive enterprise group in China that has exceeded 100 billion RMB both in gross industrial output value and sales income after FAW, Dongfeng and SAIC. In 2008, GAIG ranked 40th in "China Top 500 Enterprises".

Fiat has spent nearly two years casting around for a new partner in China ever since its joint venture with Nanjing Auto bit the dust after failing to make much of an impact in the market leaving Fiat with a lot of ground to make up on its European rivals, most of which have established a solid foothold in this rapidly growing market. Last summer Fiat announced plans to build a diesel engine manufacturing facility at Chongqing. Changan Auto, which has an on-going joint venture with Suzuki, is reported to be preparing to build the Suzuki SX4-based Sedici on behalf of Fiat in China.

The Italian carmaker, which re-launched its Chinese dealer network late last August by importing the Palio, Grande Punto, Bravo and Linea models, has for sometime also been exploring joint venture opportunities for the Fiat and Alfa Romeo brands with Chery Automobile, and although a Memorandum of Understanding was signed the talks have failed to make any progress and in March the two parties announced that the proposals were being put on ice. Importing cars into China isn't a competitive proposition due to high duties, but it was seen as a necessary step for Fiat to maintain a presence in this market. Local media often cite Fiat as asking too high a price for its technology as being a key stumbling block to it being able to develop a successful joint venture in China.

If a deal with Fiat is signed then GAIC will be building on several automotive joint ventures it already operates. It has car making JV's with Honda and Toyota, built for domestic consumption, and a bus manufacturing JV with Izuzu. This though will be its first JV with a European carmaker.