By Colum Murphy 

BEIJING--After years of lost ground, Jeep is hoping locally produced vehicles will help it make inroads into China's booming market for sport-utility vehicles.

Fiat SpA and its Chrysler Group LLC arm expect to build Jeep vehicles in China for the domestic market starting in late 2015, the two companies said Saturday.

They will manufacture Jeep vehicles in the world's largest car market through a joint venture between Fiat and its Chinese partner, Guangzhou Automobile Group Co., the statement said. China is the largest market for Jeep outside of the U.S.

While Jeep was among the first foreign brands to sell cars in China, it has struggled in its effort to build vehicles here. Production in China began in 1983 but ceased in 2006 just before Jeep's owner, Chrysler Group, was split from Daimler AG. Daimler kept a facility in Beijing that had assembled Jeeps.

Now, Jeep is in catch-up mode. Growth of the sport-utility vehicle market in China has been explosive. Sales of the vehicles in the country grew 49% to about three million last year, according to data from the China Association of Automobile Manufacturers.

Yet Jeep sold only around 60,000 vehicles in 2013. By contrast, it sold more than 731,000 vehicles world-wide, up 4% from a year earlier.

Without a local production facility in China, foreign car makers find it difficult to sell in large volumes and imported cars are less competitive in the market as they are subject to duties. Jeep sells the Wrangler, Grand Cherokee and Compass in China. Some high-end Jeeps can sell for as much as $205,000 in China, more than triple its price in the U.S.

The new agreement with Guangzhou Automobile should help Jeep get back on track, although China's SUV market is becoming increasingly crowded as more car companies--foreign and Chinese--look are lining up products to aggressively target the segment.

James Chao, Asia-Pacific director for consultancy IHS Automotive, said Jeep has revamped its product portfolio to create a more fuel efficient lineup. "I expect them to do well in China given the overall boom in SUVs here and heightened concerns about the environment. He said that while current volumes in China are small, Jeep's brand is strong in the country.

Saturday's statement didn't offer details on the models that would be manufactured by the joint venture, known as GAC Fiat, saying only that three Jeep models would be produced. One of the models is expected to be the new Renegade subcompact SUV presented at the Geneva motor show earlier this year.

GAC Fiat currently produces Fiat sedans Viaggio and Ottimo at the joint venture's plant in Changsha in central China.

"Today's announcement represents the next chapter in the proper utilization and expansion on a global scale of the Jeep brand," said Sergio Marchionne, chief executive officer of Italy-based Fiat. "Equally important is our continued development in the Chinese market with an established and respected partner such as Guangzhou Automobile Group," said Mr. Marchionne, who is also chairman and CEO of Chrysler Group, whose headquarters are in the U.S. Fiat plans to create a holding company for its merged operations, Fiat Chrysler Automobiles NV, this year that would be based in the Netherlands.

GAC Group Chairman Zhang Fangyou said Saturday that the latest step for Jeep "will enhance the sustainable development of the joint venture, and will surely bring premium experiences of driving and services to the Chinese customers."

Rose Yu in Beijing and Christina Rogers in Detroit contributed to this article

Write to Colum Murphy at colum.murphy@wsj.com

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