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Carmaker plans plants abroad
( 2004-02-04 09:02) (China Daily by Gong Zhengzheng)

Up and coming Chinese carmaker Chery, said it is negotiating with companies from Venezuela and Pakistan to build plants there.

Foreign partners will invest to build plants and buy manufacturing equipment, and Chery will export its engines and spare parts to Venezuela and Pakistan for expected car production, said Jin Yibo, deputy general manager of Chery's sales division.

"Those cars will be sold in the two countries under the Chery brand," Jin said in an interview.

Chery will start to produce own brand cars in June at a plant in Iran built by local partner SKT with an initial annual capacity of 30,000 units.

This will make Chery, based in East China's Anhui Province, the first Chinese automaker to produce passenger cars abroad.

"Chery enters those markets where there is small demand and foreign auto giants are unwilling to invest heavily in," said Jia Xinguang, a researcher at the China National Automotive Industry Institute.

"But it is of some symbolic significance for the Chinese auto industry under the context that the domestic car market is controlled by foreign brands," Jia said.

Chery's plan comes as all of foreign auto giants are vigorously speeding up production in China, the world's fastest-growing major car market.

"The plan is part of our strong engagement in the international market," Jin said.

Jin said Chery also aims to export 10,000 completed cars to Middle East and Central and South America this year, up from 1,000 units last year.

The company has received overseas orders of more than 7,000 cars so far this year.

Chery started to export cars to Syria in late 2001.

Some other companies in China, such as Shanghai VW and Shanghai GM -- Volkswagen and General Motors' joint ventures in Shanghai -- and Geely, the sole Chinese privately-owned carmaker, have also begun exporting cars in small volume.

"But passenger car exports and overseas production are new things for domestic automakers. Low and medium-end trucks, buses and others for special purposes now account for the majority of China's overseas vehicle shipment," said Yale Zhang, an analyst with Automotive Resources Asia Limited, the industry consultancy.

"Domestic companies would not export a massive number of cars within the next five years because they are still focusing on the booming domestic car market and quality and costs of their products have not been not internationally competitive," Zhang told China Daily.

China exported 125,129 vehicles last year, only 2,849 were passenger cars.

Total passenger car output in the nation surged by 83 per cent to 2.01 million units last year.

"However, China's car exports in large quantities will be inevitable over the next 10 to 15 years as a result of mounting competition and slowing growth of the domestic market," he said.

China's car output this year is forecast to grow nearly 50 per cent this year.

"We will have to drastically expand in a short period of time to survive fierce competition with strong rivals," Jin said.

Chery has set a maximum sales target of 180,000 to 200,000 cars this year, he said.

"We will launch a sport utility vehicle later this year and five to seven new models next year," he said.

The company now produces the Chery Qiyun, Fengyun and Oriental Sun sedans and QQ mini cars, retailing between 50,000 yuan (US$6,000) and 170,000 yuan (US$20,500).

The company has built an annual production capacity of 350,000 units.

"We will possibly seek to go public on the stock market in the future to raise money for our expansion, although our financial condition is very sound at present," Jin said.

Last year, Chery reported 8.3 billion yuan (US$1 billion) and some 1.8 billion yuan (US$217.3 million) in sales revenue and profit respectively.

"We have 10 billion yuan (US$1.2 billion) of bank loans at hand," he said.

Asked whether the company will sever ties with Shanghai Automotive Industry Corp (SAIC), he said: "I don't want to comment on our relations and now we are still under the name of 'SAIC Chery Automobile Co Ltd'."

SAIC, one of China's biggest State-run automakers, became a 20 per cent shareholder of Chery at the end of 2000 under a government-formed assets transfer plan.

However, it has been widely reported that the two companies will divorce pushed by SAIC's joint venture partner General Motors which alleges Chery of pirating its car designs.

General Motors is investigating that Chery's QQ is similar to the Chevrolet Spark, made by the US carmaker's joint venture in South China.

"It is a common practice that a company absorbs good features of others when it develops new products from the start," Jin said.

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