Chery JV to produce vehicles for export

CHERY Automobile Co Ltd is teaming up with America's Quantum LLC on a joint venture that will produce high-end vehicles in China for sale overseas.

Total investment in the new venture, to be located in Chery's home city Wuhu in Anhui Province, will amount to 5.8 billion yuan (US$753 million), a Wuhu city government official said yesterday.

Quantum LLC, a subsidiary of Israel Corp, will spend US$225 million for a 45 percent stake in the new entity and is also expected to provide an additional US$180 million guarantee to help Chery fund additional investment, according to media reports.

The new venture will comprise facilities for assembling, coating and painting Chery-brand vehicles as well as a test track. It is expected to turn out 150,000 units a year, lifting Chery's total production capacity to 500,000 vehicles.

"Quantum has a strong financial background and can help Chery consolidate resources to grow in the US market," said Jin Yibo, vice director of Chery Automobile Sales Co Ltd.

Parent Israel Corp is one of Israel's major holding companies. Its main activities are focused on chemicals, shipping, oil and energy, advanced technology.

State-owned Chery, China's fourth-largest auto maker in terms of sales last year, has seven overseas manufacturing productions in six countries, including Iran, Malaysia and Argentina.

It has also formed a partnership with Chrysler for making small vehicles and supplies engines to Italy's Fiat in China.

"We have seen very good sales performance in the overseas market," Jin said earlier.

"We are now selling more technology as well as management expertise through our partnerships."

Chery has been investigating channels to begin selling its models in the United States and Europe as early as 2008, where it hopes to take advantage of its competitive pricing.

Some analysts believe the company is facing financial pressure, as its mainstream model, the Chery QQ compact, is priced at less than 50,000 yuan and earns little profit.

Zhang Yu, an analyst at auto consulting firm CSM Asia Corp, said the new cooperation will should help Chery gain important financial support.