The Chrysler Group’s Italian parent Fiat (FIATY.PK) is reportedly nearing a deal to initiate production of the Jeep Grand Cherokee in China, after making concessions with its Chinese partner regarding the manufacturing site, sources told Bloomberg.
The Jeep facility will now be located near the home of the Guangzhou Automobile Group Co., in the Panyu district of Guangzhou, Bloomberg says, adding that the new agreement opens the doors for Jeep to resume production in the country after it ceased its Chinese operations in 2006. In 1983, Jeep was the first foreign brand to launch a production campaign in the country.
Fiat and Chrysler CEO Sergio Marchionne is determined to make Fiat a global automaker with the merger of Fiat and Chrysler, and the group is bringing Jeep back to China to capitalize on the growing popularity of SUVs and crossovers in the country. “Jeep has a deep heritage in China, where sales of sport-utility vehicles keep on growing,” Ian Fletcher, an analyst at IHS Automotive pointed out. “It’s a great way for Marchionne to expand in China and will also support other brands of the group in the country.”
Local production for the brand is also an almost necessary survival tactic for Jeep in China where the country imposes a 25 percent tax on imports. This means that the Jeep Grand Cherokee starts at roughly 579,000 yuan, or $95,000, compared with the $28,995 base price in the U.S.
IHS contends that Fiat’s deliveries in the country should reach 142,000 or so, from 66,000 now, with Jeep contributing 53,000 deliveries in 2015 — double the brand’s current rate. Due to Jeep’s early entrance to China back in the 1980s, the brand is more readily recognized than other Fiat products, offering a sort of spearhead into one of the largest auto markets. The new Jeep facility is expected to cost around $770 million, and have the production capacity for 60,000 vehicles annually.
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