Chinese cars make inroads in Peru's surging market

Reuters (Lima) - Having seduced thousands of first-time car buyers with cheap compact vehicles, Chinese automakers are now making inroads in Peru selling SUVs and sports cars in one of the world's fastest growing economies.

New car sales in the Andean country jumped 54 percent in 2010, when Peru's economy accelerated nearly 9 percent, as access to jobs and bank loans enabled consumers to buy new imports rather than second-hand ones.

The arrival of Chinese models has helped renovate the quirky automotive fleet in Peru, with decrepit minivans known as "combis" serving as buses and where many cars have had their steering columns switched to the left side after serving as taxis in Japan where steering columns are on the right.

Congress periodically hears calls to ban used-auto imports over safety and environmental concerns.

Though Peru imports the bulk of its new cars from Japan and South Korea, local industry analysts see China's share of the red-hot market increasing to 15 percent in 2011 from 12 percent in 2010.

Annual auto sales are seen rising this year to 170,000 from 120,000 in 2010, according to the Automotive Association of Peru.

"For well-equipped cars, the price difference for Chinese models is significant for Peruvian consumers," said Edwin Darteano, vice president of the association.

In Chile, one of the few other Latin American countries where Chinese carmakers have grabbed sizable market share, Chinese cars have 7 percent of the market. That is much higher than the 1 percent slice they have in Brazil. Peru and Chile have free trade agreements with China, which is a key buyer of their copper, gold and other minerals.

Chile's SK Berge, one of the largest auto groups in Peru, represents China's Chery Automobile, alongside Alfa Romeo, Kia and other international brands. Its most popular Chery model is a two-door mini "QQ" sedan, mostly for first-time owners.

The top-selling Chinese cars in Peru are made by industry giants including Chery, Geely Automobile Holdings, and Great Wall Motor Co.

But there are 96 Chinese brands on the Peruvian market sold both formally in dealerships and informally by rogue vendors compared to around 10 represented in Chile.

"We're going to see a maturity process in the market," Darteano said. "There isn't room for nearly 100 brands."

SK Berge is betting it can rise to the top by selling more expensive trucks and sports cars from Chery, China's largest independent carmaker, to bigger spending Peruvians.

"Our goal is to reach more traditional clients -- those who would normally choose Toyotas, Nissans or Volkswagens," said representative Gianfranco Elespuru in the year-old Chery showroom he oversees in Lima.

FELL IN LOVE WITH CHERY'S FACE

It didn't take much to convince Ruth Paredes, a 56-year-old professor in Lima.

"I saw Chery's FACE at a show in Jockey Plaza and just fell in love with it," she said, referring to the hatchback she encountered at Lima's most luxurious shopping mall.

Paredes purchased the car three months ago after parting ways with her aging Honda.

In its bid to become a global player, Chery launched in Australia earlier this year. Like other Chinese car makers, it has thus far struggled in the developed world where consumers frequently view Chinese vehicles with suspicion.

That sentiment is less prevalent in Peru, which along with China is one of the world's fastest developing economies.

"Peruvian consumers are more demanding every day and Chinese companies are responding to that demand, I don't have any prejudice," said Paredes.