(Bloomberg) -- Fiat Chrysler Automobiles NV and Beijing-based BAIC Group are exploring a joint venture, which would be the Italian carmaker’s second partnership in China after its tie-up with Guangzhou Automobile Group Co., according to people familiar with the matter.
The discussions are at an early stage, the people said, asking not be identified as the talks are private. BAIC’s Hong Kong-listed unit surged 12 percent to HK$8.69, the highest closing price in 14 months. The company has a market value of $8.5 billion. FCA slipped 0.6 percent to 5.7 euros at 1:48 p.m. in Milan.
FCA formed its first production venture in the country in 2010 with Guangzhou Auto to produce Fiat brand vehicles. Last year, the venture was expanded to manufacture the Jeep Cherokee at its plant in Hunan province’s Changsha city.
China requires foreign automakers to set up joint ventures with local partners to manufacture locally and avoid hefty import taxes as part of an industrial policy to spur technology transfer and operational know-how. Each international carmaker is limited to two passenger-vehicle JVs, with no limit on the number that the local partner can have.
For FCA Group, which also owns brands including the Chrysler, Dodge and Lancia, a second joint venture would allow it to broaden its offerings of China-produced models beyond the Jeep and Fiat brands. BAIC currently produces Hyundai and Mercedes-Benz vehicles for sale in the Chinese market with Daimler AG and Hyundai Motor Co.
“A new partnership in China could help Fiat boost its sales in the country, as the carmaker is still far behind its main competitors,” said Vincenzo Longo, a strategist for IG Group in Milan.
China is and will continue to be one of Fiat’s most important markets, the company said by e-mail. “It is our wish to continuously grow our business in China. In an effort to achieve this goal, FCA will investigate potential new projects as part of our ongoing business.”
BAIC declined to comment. Sina.com reported this week the talks between BAIC and FCA Group.
Total vehicle sales of the GAC Fiat Chrysler venture almost quadrupled to 75,834 units in the first seven months compared with the same period a year earlier, according to China Association of Automobile Manufacturers data.
With assistance from Yan Zhang, Tian Ying, Tommaso Ebhardt