Fiat Chrysler Automobiles and Beijing-based BAIC Group are exploring a joint venture, which would be the Italian carmaker's second partnership in China after its tie-up with Guangzhou Automobile Group, according to Bloomberg sources.
The discussions are at an early stage, the sources told the news agency.
FCA formed its first production venture in the country in 2010 with Guangzhou Auto to produce Fiat brand vehicles. Last year, the venture was expanded to manufacture the Jeep Cherokee at its plant in Hunan province's Changsha city.
Bloomberg noted China requires foreign automakers to set up joint ventures with local partners to manufacture locally and avoid hefty import taxes as part of an industrial policy to spur technology transfer and operational know-how. Each international carmaker is limited to two passenger vehicle JVs with no limit on the number that the local partner can have.
For FCA Group, which also owns brands including the Chrysler, Dodge and Lancia, a second joint venture would allow it to broaden its offerings of China-produced models beyond the Jeep and Fiat brands. BAIC currently produces Hyundai and Mercedes-Benz vehicles for sale in China with Daimler and Hyundai Motor.
"A new partnership in China could help Fiat boost its sales in the country, as the carmaker is still far behind its main competitors," Vincenzo Longo, a strategist for IG Group in Milan, told Bloomberg.
China is and will continue to be one of Fiat's most important markets, the company said by e-mail. "It is our wish to continuously grow our business in China. In an effort to achieve this goal, FCA will investigate potential new projects as part of our ongoing business."
BAIC declined to comment. Sina.com reported this week the talks between BAIC and FCA Group.
Total vehicle sales of the GAC Fiat Chrysler venture almost quadrupled to 75,834 units in the first seven months compared with the same period a year earlier, according to China Association of Automobile Manufacturers data.
Any tie-up between BAIC and FCA would, in fact, take Jeep back to its roots in China.
In a western-Sino joint venture established about the same time as Volkswagen's first alliance in China, Jeep, then owned by American Motors, first put vehicles into production in China in 1985, after several years of negotiations between the US firm and Chinese automakers and government authorities.
Beijing Jeep Corporation had become China's first Sino-western automotive joint venture when established in 1984. Early model lines included the compact (by US SUV standards) Cherokee and, later, the larger Grand Cherokee.
Almost six years after talks on the joint venture had begun, the first Cherokee rolled off the assembly line on 26 September 1985. Assembly of the Cherokee continued after Chrysler's buyout of American Motors as did production of Beijing BJ212-based SUVs.
Some Chrysler models were subsequently added to the Chinese company's product line including the Jeep Grand Cherokee, Mitsubishi Pajero [Shogun] Sport, and Mitsubishi Outlander. Chrysler left the joint venture in early 2009.
During Chrysler's short-lived partnership with Daimler, parent of Mercedes-Benz Cars, it was decided that the American company's Chinese joint venture would produce Mercedes-Benz-branded products. Beijing Jeep became Beijing Benz-DaimlerChrysler Automotive with the then German chancellor Gerhard Schroeder a guest at the 2004 naming ceremony.
While Chrysler was removed from the company in 2009, it remained in its legal name for several more years.