"After completing the (asset) appraisal of Nanjing Fiat, Shanghai Volkswagen has signed an asset take-over agreement and will formally set up its Nanjing production base in the near term," said a statement by SAIC Motor.
It did not disclose any financial details about the deal.
But the 21st Century Business Herald newspaper reported Wednesday that the take-over price would reach around 1.5 billion yuan (€136 million).
Nanjing Fiat was a joint venture between Fiat and China's Nanjing Auto. The two companies terminated cooperation after SAIC bought Nanjing Auto in the biggest-ever tie-up between Chinese vehicle makers in December 2007.
"The utilisation of Nanjing Fiat's capacity has long been insufficient while Shanghai Volkswagen has been facing capacity bottlenecks due to booming sales and the lack of a new production base," the statement said.
Shanghai Volkswagen, a 50-50 joint venture between SAIC and Volkswagen, expects the new base to start production in the middle of this year, with output to reach 60,000 units this year and 100,000 in 2010, it added.