SHANGHAI, China - China's Chery Automobile Co., the country's biggest domestic automaker, is in talks with Italian car maker Fiat Auto on expanding ties following an engine deal last year.

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Among the options would be a joint venture in China to assemble Fiat cars, an unnamed industry source familiar with the situation said.

Chery officials have deflected questions on the issue, without saying whether talks were under way.

"Now, we are only cooperating on engines. We haven't planned any further cooperation at the moment," a Chery spokesman, Wang Wei, said Thursday in a phone interview.

In an interview with the Chinese Web site sohu.com published Monday, Chery's chairman, Yin Tongyao, would only say that the cooperation so far "is limited to engines."

In October, Fiat SpA signed an agreement with Chery to buy 100,000 engines for cars built in China and overseas.

At the time, Fiat's CEO Sergio Marchionne said the companies might expand their cooperation further. Financial terms of that deal were not disclosed.

Fiat has a 50-50 joint venture with state-owned Nanjing Automobile Co. in neighboring Jiangsu province, but local media reports said the company is dissatisfied with the results of that alliance and may be looking for a new local partner.

Fiat has also set up alliances with China's SAIC, a unit of Shanghai Automotive Industrial Corp., Severstal Avto of Russia and India's Tata Motors Ltd.

Chery, owned by the local government in Wuhu, a city in eastern China's Anhui province, recently said it plans to set up three assembly plants abroad, in the Middle East, Eastern Europe and South America.

The company also has plans to export to the United States and to make cars for DaimlerChrysler AG for sale worldwide under the Dodge, Chrysler or Jeep brands.

Chery sold 272,400 vehicles in China in 2005.