Guangzhou Auto, which has joint ventures already between Toyota (above, Yaris) and Honda (top, Odyssey), has ambitions to increase production capacity to 1.3 millions units a year by 2010 and produce a wide range of vehicles under its own brand name.

More than six months of talks between Fiat and Chinese carmaker Guangzhou Auto have resulted in an agreement to form a manufacturing joint venture with an investment of 4.27 billion yuan (US$625.7 million). The confirmation came via the official Shanghai Securities News in a report today. Guangzhou Auto, which has joint ventures already between Toyota and Honda, has ambitions to increase production capacity to 1.3 millions units a year by 2010 as well as producing a wide range of passenger vehicles under its own brand name.

The newspaper said that while the deal was still being finalised the joint venture could receive Chinese government approval as early as this month and that production would start in early 2011 with a full capacity target of 140,000 automobiles and 220,000 engines a year. Shanghai Securities News drew its source from a posting on the Ministry of Environmental Protection website in late March that confirmed that Fiat and Guangzhou Auto would jointly invest 4.27 billion yuan to build a new manufacturing facility in Guangzhou, the capital city of Guangdong Province.

Fiat and Guangzhou Auto have been talking since last October. Initially Guangzhou Auto had been looking to buy the redundant production lines from the failed Nanjing Fiat joint venture as well as being interested in the tooling of the former Italian built Alfa Romeo 166 and Lancia Lybra models, however with Fiat urgently casting round for a new production partner in China talks quickly progressed towards a joint venture. The Nanjing Fiat assets were subsequently sold to VW which was urgently looking for more production capacity in China, while a Memorandum of Understanding (MoU) signed between Fiat and Chery Automobile in 2007 was quietly put on hold in March after making no headway. Talks between Fiat and Guangzhou slowed earlier this year as a result of the global economic downturn and Fiat's focus on striking a deal with Chrysler.

Guangzhou Automobile Industry Group Co., Ltd. was founded on June 8th, 2000. It is authorised by Guangzhou Municipal Government to operate state-owned assets. Benefiting from the sustainable and fast development of Chinese automotive industry, in 2007 Guangzhou Auto 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 Guangzhou Auto 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 Guangzhou Auto ranked 40th in "China Top 500 Enterprises".

At the same time it was revealed earlier this week that Guangzhou Auto has reached agreement to take a large equity stake in rival Chinese carmaker Hunan Changfeng Motor Co which makes a range of SUV category vehicles. The deal would give Guangzhou Auto up to a 30 percent stake in Changfeng and would make it the largest shareholder. Currently the company has a market capitalisation of 5.78 billion yuan and includes Mitsubishi Motors Corporation amongst its minority shareholders. Changfeng's parent company is its the largest - and controlling shareholder - with a 50.98 percent stake.