(Bloomberg) -- China’s Dongfeng Motor Group Co. is in early talks with the Italian government about making cars in the country to help boost its international business.

Dongfeng, a partner of Fiat maker Stellantis NV, is weighing a plant in Italy with a capacity to make more than 100,000 vehicles annually, Qian Xie, who heads operations in Europe, said Tuesday. Italy has been trying to attract another carmaker to the country after clashing with Stellantis’ plans to cut jobs and move positions to lower-cost sites.  

“Italy is one of Europe’s largest automotive markets and for a Chinese carmaker having local production means that you can supply all other countries in the area,” Xie said in an interview in Milan. 

Read More: Stellantis CEO Warns Pain to Come If Italy Gets Chinese EV Plant

Talks with Rome are ongoing and the government will offer Dongfeng some options for production sites in the next few weeks, he said. The plan potentially sets up the government and Stellantis for deeper ructions. Chief Executive Officer Carlos Tavares earlier this month warned of having to make “unpopular decisions” if a Chinese electric-vehicle manufacturer were to set up shop in Italy.

Dongfeng Motor, which in addition to making Stellantis branded Peugeot and Citroen cars in China also partners with Honda and Nissan, is under pressure at home where demand for gasoline cars has been falling. Since peaking in 2017 at 2.83 million deliveries, Dongfeng’s sales fell to 1.72 million last year, a 38% decrease.

Read More: Stellantis to Sell China Automotive Assets to Partner Dongfeng

“In Italy you can take advantage of all the strong legacy that the country has in the automotive industry,” Xie said. He added that despite Dongfeng “strongly” believing of an electric future, as of now for Italy the carmaker would need to focus on hybrid cars.

Italy is lagging behind European peers in EV adoption. Last year, battery-powered vehicles accounted for about 4% of sales, well short of the European average of almost 15%, according to consulting firm AlixPartners.

--With assistance from Linda Lew and Alberto Brambilla.

©2024 Bloomberg L.P.