Cars

Chery Auto to build $200m factory in S America

By Ding Qingfen (China Daily)
Updated: 2011-05-31 09:07

A worker assembles a Chery Automobile Co vehicle in a factory in Wuhu, Anhui province, China. Chery has 16 manufacturing bases abroad, including two in Latin America. [Photo/Agencies]

BEIJING - Chery Automobile Co will break new ground in Latin America when its $200 million factory in Venezuela starts producing vehicles for the region later this year, a move seen as further enhancing foothold in the overseas market of the automaker, a top company executive told China Daily.

Chery had signed a cooperative agreement with China Development Bank and the Venezuelan government to set up the new factory, which will be the second-largest that Chery has in Latin America, following its existing auto manufacturing facility in Brazil.

Du Weiqiang, vice-president of Chery International, said the new auto-making plant will be producing 20,000 cars annually.

"Venezuela is not an open market, which leaves huge potential for us to tap, if we have an assembly factory there to sell domestically. And also, Chery has rich experiences in Latin American nations," Du said.

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The new factory will be the first Chinese automotive plant in Venezuela and will help Chery - China's largest auto exporter and largest Chinese independent automaker - to ramp up its exports.

Since December 2007, Venezuela raised import tariffs on autos to 40 percent from 35 percent, as a way to fend off imports and protect its own auto industry.

It is estimated that 15 global auto-making companies - mostly from the United States, the European Union, Japan and South Korea - have established factories in Venezuela to cash in on the potential growth of the emerging economy, whose annual production capacity is 250,000 vehicles at the moment.

But such capacity is far from meeting local demand, especially people who want to buy budget vehicles. That provides a niche opportunity for Chinese automakers to gain entry into the domestic market.

"The new factory will mainly make budget cars. Our target is the local consumers," Du said.

Under the agreement, China Development Bank will "grant loans to the Venezuelan government and Chery will transfer technology."

Venezuela imports more than 50 percent of its auto parts annually. The local government has urged foreign companies, including Chinese automakers, to transfer technologies to local partners.

Venezuela is a major crude oil producer and exporter. Since October 2009, the nation has launched a wave of economic stimulus packages, including building infrastructure and simplifying administrative processes.

Venezuela's economy dropped by 1.4 percent in 2010, but it bounced back and increased by 4.5 percent during the first quarter of this year.

Chery has 16 manufacturing bases abroad, including two in Latin America - Brazil and Uruguay. The factory in Brazil, with an investment of $400 million, can eventually produce 150,000 autos annually.

"Latin America is the best performing region for Chery's overseas market, thanks to a stable political situation, less trade barriers and a mature consumption market," Du said.

Since the recent global financial crisis began, Latin America has been one of the top three overseas markets for Chinese automakers, with Brazil expected to overtake Germany as the world's fourth-largest auto market this year.

In 2010, Chery registered sales of 23,000 vehicles in Latin America, making the region the fastest growing market for the Chinese automaker.

Last year, Chery sold 91,986 vehicles, mostly in developing regions such as Southeast Asia, the Middle East, Latin America and Africa.

The company has set a target to sell 120,000 vehicles in the overseas markets for 2011.