Chery Auto mulls opening factory in Brazil

Big Chinese automaker Chery is considering open a 700-million-dollar factor in Brazil to tap into the country's growing market, and to learn more about building biofuel-capable engines, Brazil's Gazeta Mercantil daily reported Friday.

"Our development center is already working on this project," the head of Chery, Yin Tongyao, said.

The plant, which would supply the Latin American market, would be built by 2012 if it goes ahead, he said.

"But before starting a factory in Brazil, we have to develop flex-fuel technology, which we still haven't mastered," he said.

"Flex-fuel" refers to car motors capable of running on biofuel or gasoline, or a mix of both. Almost all new cars in Brazil -- the world's biggest exporter of ethanol, made from sugarcane -- feature such engines.

Chery Brazil chief Luis Curi said the mooted factory would imply an investment of 700 million dollars and would be able to produce between 100,000 and 150,000 cars per year.

Yin said his company, China's biggest independent car manufacturer, intended to sell at least one biofuel-ready Chery model in Brazil next year.

The company will from June this year start offering four gasoline-only models in the country from June. Two of the models will be imported from neighboring Uruguay, where Chery already has an assembly plant, and two directly from China.

The top price in Brazil for a Chery car -- its A3 sedan with all the options -- will be around 44,000 reais (20,000 dollars), Curi said.

Chery vice-president Zhou Biren acknowledged to Gazeta Mercantil that the biggest challenge his and other Chinese automakers faced was overcoming the perception that their vehicles were cheap and badly made.

"It's hard work, but trust is built step by step. The same thing happened with the Japanese and the Koreans," he said.

Chery was China's biggest automobile exporter last year, accounting for more than a quarter of the country's car exports. Chery shipped 135,000 units abroad last year, up 12.6 percent from 2007, according to the China Association of Automobile Manufacturers.