Chinese automaker Chery is considering spending $700m on a manufacturing facility in Brazil as part of its strategic decision to grow the brand here this year.
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The plans were revealed to a group of Brazilian journalists invited to visit China and drive some of Chery models. The Brazilian factory would start production by 2012 and would also serve as an export ‘hub’ for Latin America, similar to the way India is a base for Japanese and Korean automaker exports to Europe and other markets.
In the short term, Chery will import four models into Brazil, but not all from China – the Tiggo compact SUV (to compete with Ford’s Ecosport) and the Face compact minivan (targeting the Chevrolet Meriva) will come from a small KD kit assembly operation in Uruguay. Those vehicles will start arriving in June and benefit from Mercosur trade rules that exempt them from 35% import tax so retail prices should be quite competitive.
Other models imported from the Wuhu plant in China are due to arrive in September. The A3, which resembles the Hyundai i30, will be re-badged here to avoid conflict with Audi while the compact QQ3 will also be offered.
The sales forecast is ambitious: 2,500 units in 2009. To achieve this, Chery has forged an allinace with all but unknown local group JLJ, said to have invested US$35m to set up a distribution network of up to 20 dealers, concentrated in regions with strong consumer buying power.
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By GlobalDataThis target contrasts with the sales of just 94 Change Ideal models (renamed Effa M100 here) in the first quarter this year while small commercial vehicles from Chana sold just 59 units. And they all are very low-priced, costing even less than domestic rivals.
Chery group president Yin Tongyao seemed well aware of Brazilians’ preferences: “We must develop flexible-fuel technology. We believe that by 2010 we will already be able to offer at least one ethanol-petrol FFV.”
But Arnaldo Brazil, from domestic consulting firm Prime Action, sees trouble ahead for the Chinese in this country: “Our safety and emissions laws are almost aligned to what is required in Europe, Japan or the US. And there is a strict consumer protection code and the service organisation must cover the whole, vast Brazilian territory,” he said.
Preliminary reviews of the Chery vehicles by the Brazilian journalists in China highlighted poor finish, suspension unsuited to our conditions, general quality issues and high cabin noise levels, and all this even in models in production for some time.
Fernando Calmon
