Chery Automobile Co Ltd's booth at an auto show in Beijing. The company aims to sell 120,000 vehicles overseas this year, which would be an increase of more than 30 percent. [Photo / China Daily]

Automaker tries to secure $50m to fund its new East African facility

NAIROBI, Kenya - Chery Automobile Co Ltd is to become the second Chinese vehicle maker to build an assembly plant in Kenya. The move will see Chery Automobile join the truck manufacturer Beiqi Foton Motors Co Ltd as the companies attempt to tap East African demand and will further strengthen Chinese links with the continent.

"They (Chery) are discussing with the (Chinese) government so that they can get some $50 million to invest in Kenya through an assembly plant," said Justus Nguu, the director of Stantech Motors Ltd, Chery Automobile's franchise holder in Kenya.

China has made big inroads in Africa, where it is seeking to secure energy, minerals and food.

Chery Automobile, which started selling cars overseas in 2002, and is now China's biggest auto exporter, aims to set up its plant next year. In 2010, the company tested the market by venturing into Kenya through a franchise.

The automaker sold a modest 120 cars last year, but aims to produce 1,000 units in 2013 at its plant which will serve Kenya, East Africa's biggest economy, and other countries in the region.

Chery Automobile, China's largest indigenous automaker, aims to increase exports by more than 30 percent this year to 120,000 vehicles. The firm is targeting developing nations in Southeast Asia, the Middle East, South America and Africa.

Chery operates 16 assembly plants overseas.

The Chinese will have to battle Japanese vehicles, which have saturated the Kenyan car market.

Toyota Motor Corp controls about 65 percent of the market, mainly through the second-hand segment.

The truck business is dominated by established players CMC Holdings Ltd and the Kenyan unit of General Motors Co.

General Motors East Africa Ltd, Associated Vehicle Assemblers Ltd and Kenya Vehicle Manufacturers Ltd are the established players in Kenya's motor vehicle assembly sector.

Analysts said proximity to growing markets was the key driver for the companies planning to set up in Kenya.

"(The delay in) lead time for orders ... has made it strategically important for auto manufacturers targeting Africa to want a serious presence in Africa," said Hanningtone Gaya, an independent regional vehicle analyst based in Nairobi.

China's truck maker, Shanghai-listed Beiqi Foton Motors, a unit of Beijing Automotive Industry Holdings Co (BAIC), plans to begin construction of an assembly plant in Kenya this year, to help it nudge up sales on the continent.

The company plans to double sales in Africa to 20,000 units by 2013 from last year by ramping up sales to economies that require heavy commercial vehicles for use in the construction of their infrastructure projects, including roads, rails and ports.

"When you look at the international markets, we are still young. Africa is a good market for us," Calvin Guo managing director of the Kenyan subsidiary of Beiqi Foton Motors.

Reuters