Chinese automaker Chery Automobile plans to start exporting cars to Europe in 2007 and begin making cars in Europe within five years, Chery sources said.

"We have signed a letter of intent" with an importer for Europe, a Chery manager told Automotive News Europe. "We will make a big trip to Europe in a couple of months and make our final decision on an importer by mid-year."

Spanish sources said Madrid-based importer Berge has been negotiating with Chery for months about European distribution. Berge imports and distributes 80,000 vehicles a year for several automakers. It operates in Spain, Morocco, Peru, Chile and Argentina. Berge opened a five-person China office to seek new business in the second half of 2003.

The export plan is to let Chery test the European market before it begins building cars there, said a source in Chery's research and development division.

"We definitely will start to build cars in Europe within five years, but we haven't made any detailed plans yet," he said.

Chery is investigating possible production sites in Romania, Poland and other Eastern European countries because wages there are lower than in the European Union, the Chery sources said.

The European launch timetable is roughly the same as Chery's plans to export to the US market by 2007.

Chery has hired Pininfarina and Bertone to develop new sedans for export.

Chery is also working with a Japanese design company called Cavax to develop a new crossover vehicle, supplier sources said.

Chery has hired Austria's AVL List GmbH to design 17 new engines, including diesel, petrol and hybrid versions.

Chery's existing models all resemble other manufacturer's models. The most egregious example is the QQ compact, which is identical to the Daewoo Matiz/GM Spark, said sources at General Motors. GM Daewoo Auto & Technology Co. is suing Chery for unfair competition practices.