Italian automaker Fiat SpA has signed a deal to buy engines from China's biggest domestic automaker, Chery Automobile Co., a state news agency reported Monday.
Chery will supply Fiat with 100,000 engines a year, the Xinhua News Agency reported.
The agreement by Chery, which is eager to expand abroad, comes just one month after the company sealed a deal to make small cars for the new Chrysler LLC.
Chery and Fiat signed a memorandum of understanding eight months ago, and auto industry media had reported that an engine supply deal was imminent.
"The agreement means that Fiat, who had been testing Chery's engines during the past year, have recognized the technologies and quality of the engines developed by Chery," Xinhua quoted Chery Deputy General Manager Zhou Biren as saying.
Zhou said the two companies are "exploring possibilities" on other cooperation, Xinhua reported, without giving details, the AP reports.
Chery became China's fourth largest producer of passenger cars in 2006, with sales of 305,200 vehicles and a 7.2-percent market share in China.
Zhou said that both Fiat and Chery are exploring possibilities on cooperation that is not confined to Chery assembling a certain model of Fiat, bernama.com.my reports.
Prepared by Alexander Timoshik