A chery sedan is on display at an auto exhibition in
Zhengzhou, Central China's Henan Province April 13, 2007.
Chrysler Group and China's Chery Automobile Co. signed a deal on Wednesday to
develop small and sub-compact cars for sale in North America, Europe and other
The companies will modify existing Chery vehicles to be sold under Chrysler
brands and co-develop future models, the two automakers said in a statement
handed out before a press conference in Beijing.
Chrysler will begin sales of Chery's A1 hatchback in the U.S. in the first
quarter of next year, Chery President Yin Tongyao told reporters. The 1.3-liter
A1 costs as little as 53,800 yuan ($7,100) in China.
Chrysler's least expensive U.S. model is the $13,850 Dodge Caliber, according
to Santa Monica, California- based Edmunds.com, which tracks vehicle prices.
Tom LaSorda, president and CEO of
Chrysler Group, speaks at the signing of a cooperative agreement with
Chery Automobile in Beijing July 4,
More than 70 percent of Chrysler's US sales come from light-trucks like its
Jeeps and Ram trucks, a product skew that analysts have cited as a weakness at a
time of high gas prices and expected tougher fuel economy regulations.
The Chery partnership is part of a Chrysler strategy to develop more models
with less investment, Chrysler Chief Executive Officer Tom LaSorda said in the
Chrysler plans to introduce 32 models from 2006 to 2010, an increase from 21
between 2000 and 2004, as five-year product spending during those spans fell
from $41.9 billion to about $30 billion.
"It makes total sense for Chrysler to have a partnership with a Chinese
automaker because that is where the growth is in the auto industry," said
Rebecca Lindland, a forecaster for Global Insight Inc. in Lexington,
Massachusetts. "It can be very unprofitable to develop new small-car platforms
on your own. "
More than 90 percent of sales for Chrysler, which holds the Chrysler, Dodge
and Jeep brands, are in North America and the No. 4 US automaker has targeted
growth in Europe and Asia as a key sales priority.
Chrysler and Chery signed a preliminary deal in December that was seen as a
major advance toward China's goal of exporting from its fast-growing auto
industry into developed markets, including the United States.
While many industry executives and analysts expect Chinese automakers to
eventually compete aggressively in the US market, several early ventures aimed
at exporting a Chinese-built vehicle to the United States have faltered or faced
Analysts have also cautioned that the first wave of Chinese-built vehicles
are likely to face skepticism from American consumers concerned about safety and
Cerberus Capital Management LP is acquiring 80.1 percent of Chrysler from
Daimler in a $7.4-billion deal expected to close this quarter.
Chery, China's first vehicle exporter, plans to increase sales 29 percent
this year following a 60 percent increase last year, it said in January. The
company sold about 305,000 vehicles, including 50,000 exports, in 2006.
In the first five months of this year, the Chinese automaker had 4.8 percent
share of its home vehicle market, the world's second-largest behind the U.S.
The automaker has sold vehicles in more than 50 countries and regions,
according to the statement. In November, it abandoned plans to export its
own-brand vehicles to North America with Visionary Vehicles LLC.
Chinese automakers have begun to target overseas sales as increasing
competition at home crimps profit. Carmakers' profit margins in the country
averaged 3.1 percent last year, compared with 9 percent in 2003, according to
calculations based on figures issued by the country's automakers association.
Chery currently exports vehicles to developing countries and has set a goal
of selling 393,000 vehicles in 2007, up 29 percent from 2006.