Fiat Group partnering with Sollers to set up global auto alliance in Russia
Fiat S.p.A. and Sollers in February signed an agreement on the establishment of a strategic auto joint venture (JV) alliance that is expected reach a capacity for producing 500,000 passenger cars and SUVs by 2016 under the Fiat and Chrysler brands. The agreement was signed in Naberezhnye Chelny, Tartastan by Sollers CEO Vadim Shvetsov and Fiat Group CEO Sergio Marchionne in the presence of Russian Prime Minister Vladimir Putin.
Target localization is expected to be no less than 50% of the JV’s products, including the production of engines, gearboxes and the establishment of a new technology park for producing components. The importance of the project for Russia is underscored by the Russian government’s commitment to offer not only political support for the JV, but also to help guarantee its long-term investments, estimated at 2.4bln euros, at favorably subsidized rates from local banks.
Commenting on the issues, the CEOs were upbeat about the future of their JV and its huge significance for the Russian auto industry. “Today’s agreement marks a 
turning point for our presence on the Russian market, as it is one of the largest alliances entered into by our group in one of the world’s most important markets,” Marchionne said. From his side, Shvetsov noted that the plans to implement a full-scale joint project with Fiat reflect confidence in the future development of the Russian auto market. “By establishing one of the global production centers specializing in the development and production of Fiat and Chrysler Group vehicles in Russia, we will be able to offer our customers the most desirable products in the most attractive passenger car segments.”
Commenting on the deal, Mikhail Ganelin, an auto industry analyst at Troika Dialog, said the alliance was remarkable, given that Russia's auto industry is currently in a deep depression. “The deal, however, creates lots of opportunities for both partners, who will obtain access to significant financial and administrative resources and additional leverage to grab market share, when the auto industry begins to recover,” he said. “It is too early to estimate the financial and operational effects from the JV, but the company plans to increase its share of the local passenger car market from the current 1% to 12% by 2016. We maintain our positive view on Sollers stock.”
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