With the Fiat Group now reportedly just days away from signing a new Chinese joint venture agreement with Guangzhou Auto it has been revealed that the new project will provide a springboard for Alfa Romeo to begin manufacturing in China.

With the Fiat Group now reportedly just a few days away from signing a new Chinese joint venture agreement with Guangzhou Automobile Industry Group Co., Ltd. it has been revealed that the new project will also provide a springboard for Alfa Romeo to begin manufacturing its range of sporty cars in China.

Chinese media has reported over the weekend that signing of an agreement could come as early as Monday, following a process of obtaining government approval that has been underway for several months now. Talks between Fiat Group and Guangzhou Auto have been going on since last September when the two parties initially opened discussions centring around the Chinese carmaker purchasing several redundant Fiat production lines including those from the failed Nanjing Fiat joint venture in China as well as two former Italian lines.

The two carmakers are targeting production of the joint venture getting underway as early as 2011 with a full capacity target of 140,000 automobiles and 220,000 engines a year. This has been confirmed through a posting on the Ministry of Environmental Protection website which said that Fiat and Guangzhou Automobile Industry Group Co., Ltd. would jointly invest 4.27 billion yuan in the project.

Guangzhou Automobile Industry Group Co., Ltd. meanwhile was founded in June 2000 and 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. It already has joint ventures with Toyota, Honda and Isuzu and has ambitious plans to launch its own-brand range of cars.

Last month Guangzhou struck a deal to merge with Hunan Changfeng Motor Co. after Guangzhou Auto reached agreement to take a large equity stake in its rival, which currently makes a range of SUV category vehicles. The deal will give Guangzhou Auto around a 30 percent stake in Changfeng and would make it clearly the largest shareholder. It plans to invest 10 billion yuan in Changfeng with the aim of producing 500,000 cars a year. The first of these cars will start rolling off the production lines in 2010. Currently Changfeng 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 and this will now be reduced to just under 22 percent. The merger has been pushed by the Chinese government which is keen to see consolidation amongst the country's more than 130 car makers.

The enlarged Guangzhou Auto will now construct a new facility that will be used to produce vehicles for four different brands under one roof. As well as its own named cars, the plant will produce vehicles for Changfeng as well as those for the Fiat Group under both the Fiat and Alfa Romeo brand names. Whilst Fiat has been exposed to the Chinese market during this decade through the now terminated Nanjing Fiat joint venture, for Alfa Romeo it will be the first time it has built its cars in China. This new opportunity comes after recent attempts to create a joint venture with Chery Automobile were put on ice after the two parties couldn't reach an agreement. That proposal clearly illustrated Fiat Group's lack of understanding of the Chinese market as the first model planned for the stillborn joint venture was to be the Alfa 159 sedan, but fitted with a mediocre Chery-sourced 1.6-litre petrol engine. Now the Guangzhou Auto deal offers Alfa Romeo a second chance at cracking the Chinese market where demand for its category of upmarket sporty cars is growing swiftly.