Fiat Group Automobiles and Chery Automobiles have decided to set up a joint venture to produce cars in China under the marques of Fiat, Alfa Romeo and Chery.
A statement from Fiat on Tuesday said a letter of intent had been signed for the joint venture which aims at producing 175,000 vehicles with production starting in 2009.
Fiat CEO Sergio Marchionne said that "the introduction of Alfa Romeo in China represents an historic milestone and is a fundamental step in our program to revamp and expand Alfa Romeo on a world level".
He added that Alfa Romeo was "one of the best-known and appreciated marques in Europe and will now make its debut on the world's fastest growing automobile market".
"The Fiat marque will also benefit from this collaboration with Chery," Marchionne said.
According to Chery President and CEO Yin Tongyao, the joint venture between his company and Fiat "will offer us the opportunity to introduce the legendary Alfa Romeo on the Chinese market. At the same time, Fiat and Alfa Romeo vehicles will enhance the range of models Chery can offer and improve our ability to compete worldwide".
Chery is one of China's leading automakers and its leading exporter of motor vehicles.
Fiat's venture with Chery was expected after Marchionne told the Financial Times in May that Fiat was unhappy with the development of its previous partnership with Nanjing Automotive Corp and was considering changing partners in China.
Marchionne explained that Nanjing Auto had been "distracted" by its project to relaunch the British-based marque MG and Fiat was considering expanding its existing alliances with either Shanghai Automotive Industry Corp (SAIC) or Chery Automobiles.
Marchionne said the failure of the venture with Nanjing Auto was "a shame. We missed an opportunity".
Fiat's target is to sell 300,000 cars on the Chinese market by 2010, the FT wrote, but its venture with Nanjing Auto has produced only 31,300 since last year.
The Italian automaker's current alliance with Chery involves the Chinese company supplying it with 100,000 transmissions and motors a year, while its collaboration with SAIC regards the production of heavy vehicles through Fiat's truck division Iveco.
