Fiat To Build a Second Model in China

By Gilles Castonguay

MILAN--Italy's Fiat SpA (F.MI) plans to produce a second car in China as it looks to increase its presence in the world's biggest market where its sales trail far behind those of its competitors, a person familiar with the matter said Wednesday.

Fiat will show off the Ottimo at the Guangzhou motor show on Thursday, according to a person. The hatchback is derived from the Viaggio sedan, which is the only other model that it builds in the country.

The person was unable to provide any more details, and Fiat declined to comment ahead of the unveiling.

Fiat will build the vehicle at the Changshan plant it shares with its joint-venture partner Guangzhou Automobile Group Co (2238.HK). Fiat is struggling to fill production capacity at the plant, which can produce 140,000 units a year. Sales of the Viaggio, which is produced at the facility, totaled 11,228 units in 2012 and are forecast to reach 37,913 in 2013, according to IHS Global Insight.

Fiat also imports to China the Freemont sport-utility vehicle and the 500 city car.

Despite the size and importance of the Chinese market, Fiat has a meager share of about 1% because it wasted a lot of time changing local partners until settling with Guangzhou.

In the first 10 months of the year, China was responsible for more than half of the 156,000 unit sales Fiat reported for the Asia-Pacific region, according to the latest figures posted on its website. In the region, it also sells models from the Dodge and Jeep brands, which belong to U.S. unit Chrysler Group LLC. Earlier this year, it signed a deal to produce Jeeps at the Changshan plant.

Bigger rivals like Volkswagen AG (VOW.XE) and General Motors Co (GM) sell far more in China alone, with unit sales going into the millions.

Despite the region's small contribution to Fiat's earnings, it's nevertheless more profitable than the Italian auto maker's traditional European market, where demand is stagnant due to the weak economy in the euro zone. In the first nine months of the year, the Asia-Pacific made 270 million euros ($364.87 million) in earnings before interest and taxes, or Ebit, compared with a loss of EUR304 million in Europe.

Write to Gilles Castonguay at [e-mail]; Twitter: @GRCastonguay

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