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Chery holds high hopes for US market

By Li Xiang (China Daily)
Updated: 2009-01-05 08:06

The global financial crisis has brought the US auto industry to the brink of bankruptcy but hasn't dampened Chinese automakers' ambitions to expand into the American market.

Chery Automobile, one of China's largest automakers said it will attempt exporting sedans to the US independently after the global economic slowdown scuttled a cooperation agreement signed with American automaker Chrysler in 2007.

The company said it is studying the feasibility of exporting its A1 model to the US. Chery's A1 model is one of its most successful mini-cars and is exported to over 60 countries and regions, mostly developing markets such as Russia and the Middle East.

Chery received a $1.45 billion loan in December from the Export-Import Bank of China to help fund overseas expansion. The company said the loan is not a government bailout but a business deal that will help finance export-related projects and develop new models for overseas market.

"It's intended as support for Chery's globalization, to make Chery stronger and bigger," said the company's spokesman Jin Yibo.

Chery started its global expansion in 2003, initially focusing on developing markets and built eight overseas factories, including some in Egypt, Malaysia and the Ukraine.

Its exports grew 132 percent in 2007, driven by sales to these developing countries, making Chery China's No 1 passenger vehicle exporter.

Chery's next goal is penetrating the North American and Western European markets by making economy cars at lower costs.

The company signed a memorandum of understanding with Italy's Fiat in 2007 to set up a joint auto manufacturing company. It also set up distributors in Austria and Eastern Europe.

But the road for Chery to access developed markets is turning out a bumpy one as the financial crisis continues to threaten the auto industry worldwide.

Its aspirations for the US market suffered a major setback when the joint project with Chrylser to develop economy cars for sale in the US was halted due to the global economic environment and subsequent changes in each company's internal strategy.

But Chery said it remains cautiously optimistic about its export business in 2009 and will continue seeking foreign cooperation to expand into overseas markets.

"Our door is always open for other opportunities to cooperate with foreign companies," Jin said in December.

Chery exported 125,000 vehicles in the first 10 months of 2008, exceeding its exports for all of 2007. It plans to export 400,000 vehicles annually by 2010, the Xinhua News Agency said in a report.

Its total export were $726 million and revenue reached $2.1 billion. This year the company predicts export will hit $900 million.

Auto industry analysts said Chery still faces challenges such as improving quality to meet US and European safety and emissions standards.

"Chinese cars will gain world recognition only when they possess the quality of European cars, service of Japanese cars and a price lower than anyone else," said Zhang Xiaoyu, vice-president of China Machinery Industry Federation.