Italia's biggest carmaker Fiat Auto SpA (Fiat) has signed a preliminary agreement to establish a 50/50 joint venture (JV) with Chinese automobile manufacturer Guangzhou Automobile Group (GAG) to produce cars and engines for the Chinese market.
Under the preliminary deal, Fiat and GAG will create a JV in Changsha, Hunan Province. Fiat and GAG will invest more than €400 million (US$555 million) in the venture, which marks Fiat's comeback to the Chinese market after it scrapped its cooperation with Chinese automaker Nanjing Automotive in 2007.
Upon the completion of the first phase of development, the JV will be able to manufacture 140,000 cars and 220,000 engines per year.
Production is set to start in the second half of 2011, Fiat said in a statement.