Chery-Subaru joint venture looks unlikely

Gasgoo.com (Shanghai September 15) - Subaru's hopes to open a joint venture with a Chinese manufacturer have reached another hurdle. According to Shanghai Securities News quoting inside sources, the agreement between Subaru's parent company Fuji Heavy Industries and Chery failed to meet national standards and was rejected.

Reportedly the joint venture proposal did not comply with the country's Policy on Development of Automotive Industry, due to Japanese manufacturer Toyota's 16.5% share in Fuji Heavy Industries. The rejection puts a damper on the potential JV, which would have its first production site located in Dalian. The 30 billion yen ($390.5m) site would have an early-production target of 50,000 vehicles, expanding to 150,000 vehicles after full completion.

Without the cost benefits achieved of manufacturing vehicles in the country, it will be hard for Subaru to compete for the Chinese market with other companies. The manufacturer has been forced to leave the country before in 2002, after a failed venture with Guizhou Aviation Industry Group. According to some analysts, Subaru's best bet is to manufacture vehicles via a Toyota-affiliated JV.