TURIN – 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 automaker'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 percent in the joint venture, which will produce up to 120,000 vehicles per year, Fiat said in a statement on Tuesday.
Fiat 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 finalized 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 truckmaker ZIL.
The first vehicle from the joint venture is expected to roll off the line at the end of 2013, Fiat CEO Sergio Marchionne said earlier on Tuesday, referring to the agreement with ZIL.
The product range is initially expected to be based on Jeep vehicles and could subsequently be expanded to include other models and engines which will be produced and assembled locally, Fiat said in a statement.
Chrysler Group, in which Fiat holds a 58.5 percent stake, may also participate in the project as an investor, as well as licensing production of some of its models.
The St. Petersburg plant will build the Jeep Liberty/Cherokee replacement, a model set to debut in the United States early next year, Automotive News Europe sources said.
Before the new plant opens, the Grand Cherokee will be built from semi-knockdown kits in ZIL's Moscow factory.
Jeep sales in Russia last year grew 159 percent to 2,093 units in a passenger car and light commercial vehicle market up 39 percent to 2.65 million units, according to data from the Association of European Businesses (AEB).
Analysts expect Russian annual vehicle sales to grow to 3.2 million units by 2013.
Fiat will use its existing distribution network of 103 Russian dealers to sell Jeeps, Fiat-branded light commercial vehicles, and Chrysler-branded cars.
Most Western carmakers 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 U.S. 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.
Luca Ciferri and Reuters contributed to this story