China's Chery Auto planning production in Belarus

China's Chery Automobile is planning to establish joint production of its cars in the territory of Belarus. It is expected that most of the funds for the project will be provided by the Chinese government as part of a $1 billion loan agreed on by China and Belarus earlier this year.

Chery has been looking for an opportunity to set up production of its low-priced cars in the CIS (Commonwealth of Independent States) countries for the past several years due to traditionally high demand for them in the former Soviet countries.

Production could be launched at the Orsha Aircraft Repair Plant or the Minsk Automobile Plant (MAP). Planned volumes have not been announced.

Chery's previous attempts at cooperative ventures with Russian companies Avtotor and TagAZ did not meet with success. Two years ago Chery terminated its agreement with Avtotor because it could not obtain concessions for duty-free imports of auto components in the Kaliningrad economic zone. Later, because of huge losses, the Chinese company stopped production at the Taganrog car factory of TagAZ.

Last year, Chery came close to an agreement with the Belarus government to produce its cars at MAZ. The Chinese company planned to start full-scale production, including stamping, welding and painting. The total costs of the project were estimated at approximately $260 million. However, the project was suspended due to disagreements between the sides.

Inside Line says: Could this be the foothold in CIS that Chery has been seeking?