Fiat and Chery postpone JV, according to WSJ

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From the WSJ:

BEIJING — Chery Automobile Co. and Fiat SpA have postponed their plan to begin producing cars this year for the Chinese market because of the global economic downturn, Chery spokesman Jin Yibo said Thursday.

“It definitely won’t happen this year,” Mr. Jin said. No new timeline has been set for the start of production, but the two companies are continuing talks, he said.

The two auto makers signed an agreement for a 50-50 joint venture in August 2007 and had aimed to produce 175,000 cars a year from 2009. The venture was to produce Fiat’s Alfa Romeo and Fiat cars, as well as Chery’s own models.

“The global situation is totally different from before,” Mr. Jin said. “We have had to adjust our strategy accordingly.”

So it starts good, and then:

For Chery, one of China’s 10 largest auto makers, this represents yet another blow to its ambition to use its association with a more established foreign auto maker to elevate its technical capability and make inroads into the U.S. and Western European markets.

Late last year, Chery’s bid to break into overseas markets fell apart when it was forced to end a joint project with Chrysler LLC to make small cars in China for sale around the world.

Does a JV in your own domestic market with a foreign manufacturer actually even matter in the global market? Chery are doing very well with their own designs and their own engineering (the G6 would be proof of this), would Chery actually benefit from Fiat tech? Possibly, but then again, possibly not. The biggest step for Chery would be high quality levels in production and the finished product, Fiat could have stepped in here.

The postponement also highlights Fiat’s difficulty in making inroads in the Chinese auto market. The Italian auto maker used to produce passenger cars in partnership with Nanjing Auto, but it exited that money-losing joint venture after Nanjing Auto was merged into Shanghai-based SAIC Motor Corp.

Fiat no longer produces passenger cars in China, though it has component and truck operations with Chinese partners. All the Fiat cars being sold in China are imported.

Fiat won’t take part in next month’s auto show in Shanghai for the first time since it began participating in China’s auto shows in the 1990s, company spokeswoman Zheng Xiaoli said Thursday. The decision is an effort to control cost amid the global financial crisis, she said.

Also Thursday, Chery announced plans to launch in China two new brands, Riich and Rely, with which the company said it hopes to break into the upscale market. It also unveiled a sedan, called G6, for the Riich brand. The car is expected to go on sale in the second half of this year with a price tag of between 200,000 yuan and 300,000 yuan ($29,260 to $43,890), the company said. It wasn’t clear what other cars Chery is planning for the two new brands.

“The launch of Riich and Rely highlight a big step forward for Chery toward an international auto company,” Yin Tongyao, Chery’s president, said in a statement.

So it looks like RIICH is set to be a one car brand, for the time being.

CCT is currently translating an interview with the Chery president, which we will post later today.