Fiat and Chrysler said they have entered a joint venture with Russia’s Sberbank to produce and distribute Jeeps and Chrysler-branded vehicles in high-growth Russia, filling a gap in the Italian firm’s geographical reach.
Sberbank intends to finance the project with up to 850 million euros ($1.14 billion) and take a stake of up to 20 per cent in the joint venture, which will produce up to 120,000 vehicles per year, Fiat said in a statement.
The first vehicle from the joint venture is expected to roll off the line at the end of 2013, Fiat Chief Executive Sergio Marchionne said, referring to the agreement with ZIL.
Most Western car makers have a local partner in Russia, but Fiat opted to go it alone after a provisional deal with Sollers collapsed in 2011. Sollers later teamed up with US car maker Ford.
Fiat, which is looking for growth in emerging markets to offset slow growth in mature European countries, will face a stiff challenge making Jeep competitive with well established brands in the Russian market such as Land Rover.
The Italian company will build a plant in St. Petersburg, and vehicles should be produced there from 2014. Fiat has not announced a date when construction will begin on the factory. The deal is expected to be finalised by end-March.
The plan also calls for the venture to assemble vehicles, SUVs and, potentially, small trucks in Moscow via contract manufacturing with Russian automaker ZIL.
The Russian car market recovered from a slump in 2011, with sales of new passenger cars and light commercial vehicles rising 39 per cent, year on year, in a total of 2.6 million vehicles. The Association of European Businesses last month forecast 2.8 million cars and small trucks will be sold in Russia in 2012, “close to pre-crisis levels”.