Fiat’s Entry Mode Into China
2. Fiat’s strategy: a. Entry mode: The main entry mode FIAT has been applying in China Market is joint venture. In 1995, FIAT tried to break into the Chinese market. Indeed it is the first host country of foreign investments, so China is an inescapable market. FIAT made an attempt to introduce there with a joint-venture with a local firm: NANJING in 1999. This Italian automaker quit the company in 2007 citing a lack of investment on the part of its Chinese partner. Probably the main problem in this alliance is the lack of confidence in the partner.
Indeed, FIAT did not trust NANJING because given that the Italian company reduced the number of models given to the Chinese one for of stealing. The most important in business for Chinese people is the trust. Without it, it cannot work. The second joint venture is with Cherry Automobile Co. The joint venture has come to an end due to Fiat signing up with Guangzhou Auto and planning to invest 500 million USD into the Chinese market. Up till now, Fiat has been in a third joint venture with Guangzhou Auto to make cars for the Chinese market.
The joint venture between the two companies will see each contribute €400 million towards building a new assembly plant in Changsha, Hunan province. The plant is expected to be operational by late 2011, and inital production is estimated to be in the region of 140,000 cars and 220,000 engines per year. b. Product line and revenue: In the past, Fiat seems to target the medium class by introducing the low price products. At first, Nanjing-Fiat produced and sold 24,000 vehicles in 2002, bringing a sales revenue of 2. billion yuan (US$280 million). Nanjing-FIAT produce four models: Fiat Palio, Fiat Palio Weekend, Fiat Siena, designed by IDeA and Fiat Perla the first model jointly designed by Fiat and Nanjing Fiat Automobile. Fiat had previously planned to invest 500 million euros in the joint venture over five years in a drive toward meeting the company’s 2010 sales goal of 300,000 vehicles in China. Nanjing Fiat sold only 30,668 vehicles in 2006. After that, from 2007, when they sign the joint venture contract with Guangzhou Automobile Co. they invest euro400 million ($556 million), The plant initially will produce 140,000 cars and 220,000 engines a year, with the potential to increase to a maximum 250,000 cars and 300,000 engines a year, Fiat said. It seems fairly clear that Fiat will target the same young, “entry-level luxury” demographic. Considering they’re relatively new to the China market, and priced comparatively high for their petite size (particularly compared to their domestic Chinese counterparts).
Fiat’s small cars and green technology are entirely applicable to the Chinese market. Fiat launch the Fiat 500 into the Chinese market, it is a small car that appear to certain niche buyers. According to our own internal estimates the Fiat 500 should be able to achieve sales of 700 to 10,000 units. Their goal is to set up the brand, we’re chasing branding value and not sales. The cars that will sell in big numbers will be our Chinese made cars from Guangzhou-Fiat.