Meanwhile, Great Wall Motor has agreed to buy General Motors' (GM) auto plant in India, the companies said on Friday, as the Chinese automaker expands overseas amid slowing domestic demand.
The filing of this sizable undertaking has been filed in China's Market Observation Post System (MOPS), which details that both companies own 50 percent of the venture equally. Meanwhile, PSA Group, with which Fiat Chrysler is now planning to merge, also manufactures Citroen and Peugeot models in the country.
The collaboration will "bring together the capabilities of two established global leaders across the spectrum of automobile design, engineering and manufacturing and mobile software technology", Fiat Chrysler said in its statement.
The company could give FCA a better way to capture more business in China, the world's largest electric vehicle market.
The aim is to reach a binding agreement in the next few months, though there's no guarantee of that time-frame, it added.
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The world's largest contract electronics maker and Fiat Chrysler would focus on developing and producing battery electric vehicles, a filing with the Taiwan Stock Exchange said.
From Fiat Chrysler's perspective, the automaker has struggled to crack the Chinese market for years, and tightening fuel-economy standards and electric-vehicle mandates make the task even more challenging. However, industry analysts believe that high development costs will cause many of them to merge.
The trend has led to a complicated mix of ties among competitors.
However, the joint venture does not produce electric models, raising doubts it could meet China's tough emissions rules and green vehicle quotas. Geely also has two separate electric brands, Geometry and Volvo's Polestar.
In addition to the participation in PSA Peugeot, Dongfeng also has joint ventures with Nissan Motor Co., Kia Motor Co. and Groupe Renault, whose product range includes all electric models.