BEIJING (Bloomberg) -- Fiat and its Chinese partner are near a deal to begin producing Jeeps in China for the Chinese market for the first time since 2006 after they compromised on the plant's location, two people familiar with the talks said.
Fiat, which had sought to make Jeep SUVs near its own facilities, recently agreed to locate the factory near Guangzhou Automobile Group Co.'s home base in the Panyu district of Guangzhou, the people said, asking not to be identified because the talks were private. The accord is still subject to final approval, one of the people said.
The agreement paves the way for Jeep, which in 1983 was the first foreign-branded vehicle to be produced in China, to make a return to what's now the world's biggest auto market. Fiat CEO Sergio Marchionne is turning to Jeep as a means to tap the Chinese market after a stalled effort with the Fiat brand.
The Cherokee will probably be the first Jeep model built at the plant, one of the people said.
A representative at Guangzhou Auto, who asked to only be identified by the family name Zhu, said the company has no information to release regarding a Jeep production site. Fiat controls Chrysler Group, which owns the Jeep brand.
Mike Manley, head of Jeep, said in an April interview in Shanghai that he expected Jeep production to start by the end of next year in Changsha, where Fiat makes the Viaggio sedan.
Although Chrysler and its Chinese partner said in January they had reached a preliminary agreement to produce Jeep vehicles in China, no details were disclosed at the time.
Because China charges a 25 percent import tariff on cars, assembling vehicles in China would lower the price of Jeep's Grand Cherokee, which starts from 579,900 yuan ($95,000) in China, compared with $28,995 in the United States, according to the automaker's Web site.
The Chinese government requires overseas automakers to set up joint ventures with local carmakers to produce domestically and avoid the nation's import duty.
The Chinese government approved Guangzhou Auto and Fiat's plan to invest 4.7 billion yuan ($771.2 million) building a new factory, which will have an initial production capacity of 60,000 units a year, according to a statement posted on the website of the Development and Reform Commission of Guangzhou Municipality earlier this year.
The Jeep brand is more recognizable than its Italian parent in China because it was the first Western badge built in the country. Jeep manufacturing in China ended after production shifted to Mercedes-Benz vehicles about 10 years ago by then-owner DaimlerChrysler.
Fiat's Jeep push in China also underscores the Italian carmaker's growing dependence on its American unit to compete with larger manufacturers. General Motors and Volkswagen sell about 15 cars in the world's largest auto market for every one that Fiat delivers.
Marchionne has been working to combine the two companies for four years to better compete with the likes of VW, Toyota and GM.
Sales in Asia accounted for 4 percent of the 3.34 million vehicles Fiat and Chrysler delivered worldwide through September. VW delivered 2.35 million cars there, helping the German manufacturer sell more than 7 million autos worldwide for the first time in the period. Both VW and GM aim to deliver more than 3 million cars in China in 2013.