Chery will sell engines to Italian car maker

ITALY's Fiat Group said yesterday it will buy 100,000 engines a year from China's Chery Automobile Co, expanding the ambitious Chinese auto maker's foreign ties just a month after it signed a deal with Chrysler to export cars to the United States.

"The agreement means that Fiat, which has been testing Chery's engines during the past year, has recognized the technologies and quality of the engines developed by Chery," said Zhou Biren, deputy general manager of the Chinese car maker.

The 1.6-liter and 1.8-liter engines will be used in cars manufactured by Fiat in China and abroad, according to a statement on Chery's Website (www.chery.cn).

The agreement showed that Chery and Fiat were confident about their cooperation efforts, and it also paved the way for further deals, Fiat Chief Executive Officer Sergio Marchionne was quoted as saying.

Yin Tongyao, chairman and general manager of Chery, said, "The cooperation will help improve Chery's competitiveness on the international market. We are glad to cooperate with Fiat and look forward to developing together."

Chery became China's fourth-largest producer of passenger cars in 2006, with sales of 305,200 vehicles and a 7.2-percent market share.

In an interim report, Chery reported exports of 52,712 vehicles in the first half, compared with 13,548 in the same period last year. Overseas sales are expected to top 100,000 vehicles for the whole year.

"Many Chinese auto brands, including Chery, are upgrading their products and vigorously seeking to expand their presence in European countries and other developed nations," said Qin Lihong, vice president of Chery's sales arm.

Chery officials said last month at the Fifth China Changchun International Automobile Fair that Chery's vehicles have proved competitive in Southeast Asia, the Middle East and North Africa and that the company plans to seek bigger markets in North America and Europe.

Chinese auto manufacturers, encouraged by robust sales, are seeking to expand overseas and shed their image as low-grade vehicle producers.

Chery, based in the eastern city of Wuhu, signed a deal with Chrysler LLC in July on a low-cost production venture to export cars to the United States. Chrysler CEO Tom LaSorda said the two companies would jointly develop future models.

Japan's Honda Motor Co has exported Chinese-built Jazz subcompacts to Europe since 2005. Other companies have announced plans to export Chinese-made cars to the US, but none has made it to market.