Chery Automobile

Chery cleared for venture to make larger cars

PUBLISHED : Wednesday, 09 January, 2008, 12:00am
UPDATED : Wednesday, 09 January, 2008, 12:00am


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Chery Automobile, which wants to expand beyond small economy cars, received final government approval yesterday to form a joint venture with an Israeli firm to build larger, more profitable vehicles.

The National Development and Reform Commission yesterday approved Chery's bid to form a joint venture with Israel Corp's US-based unit, Quantum, to produce 150,000 vehicles annually.

The joint venture will make passenger cars and sport-utility vehicles for the domestic and overseas markets, said the NDRC on its website.

Anhui-based Chery, the maker of the popular economy car QQ, first announced the 5.8 billion yuan joint venture in May last year.

Quantum will invest US$225 million for a 45 per cent stake in the venture, while Chery will hold the remaining 55 per cent.

'The venture has no plans to export sedans to the US market,' said Jin Yibo, the administration office director of Chery. South America is likely to be the first market.

Chery, China's fourth-largest carmaker, said on Thursday it sold 381,000 vehicles priced at about US$5,000 each last year, a 24 per cent increase from 2006. But it fell short of its target of 393,000 units due to slower growth domestically.

Chery's sedans have captured more overseas consumers in the past few years, mainly in the Middle East, South America and Russia. According to the company's figures, it exported 119,800 sedans last year, an increase of 24.8 per cent year on year.

Chery is paving the way to eventually tap the US and western European markets. It has finalised a deal with US carmaker Chrysler to develop and distribute small cars in North America. It has also cemented a tie-up with Italy's Fiat for producing 175,000 cars by next year.

'China's small cars will one day gain consumer favour in mature markets because they are inexpensive and fit the taste of those markets,' said Pedro Neuno, executive president of the China Europe International Business School.