Chery is seeking help from a local partner to grow sales in Brazil; CAOA sees an opportunity as Brazils market recovers

Chery is seeking help from a local partner to grow sales in Brazil; CAOA sees an opportunity as Brazil's market recovers

The Brazilian group CAOA and Chery have signed a cooperation accord in order to start CAOA Chery. 

Chery's 'deep strategic cooperation' with CAOA Group means that both parties will jointly manage Chery's factory in Sao Paulo, Brazil.

The deal is valued at around US$60m for CAOA to acquire 50% of the Chinese brand's Brazilian operations including the Jacarei plant, in the Greater Sao Paulo area; importation and sales are included.

Chery has already invested $530m in Brazil for a two-shift, 50,000 unit annual capacity manufacturing site. However, the site has been drastically underutilised (estimated running at below 20% capacity) due to Brazil's recession and market slump, as well as the negative image of Chinese products. Chery currently sells the new QQ hatchback and the Celer hatch and saloon in Brazil.

Under the new arrangements, the administration of the business and operations will be the main responsibility of the Brazilian group, together with the operation of a Hyundai plant in Anapolis (160km/100mi southwest from Brasilia, the nation's capital) where Hyundai ix35, Tucson and light trucks are produced. CAOA will also handle the importation of Hyundai and Subaru models. The group also looks after a dealer network for both eastern brands as well as Ford and has sold over 1.2m vehicles throughout its history.

The Brazilian company intends to invest $2bn over five years, according to an official statement. Mauro Correia, the group's executive president, expects Chery to capture 5% of the Brazilian market - an ambitious sounding goal.

Additional Chery models - such as the Tiggo 2 SUV and Arrizo 5 saloon - may be made either at the Chery plant or at the 10-year old Anapolis plant. 

According to the agreement, both parties will set up a joint team to conduct comprehensive depth joint venture or cooperation in the R&D, manufacturing, purchasing, sales, services and other areas. In the next few years, both parties will launch 2-3 new Chery brand models.

Chery's cooperation project with Brazil CAOA will be China's largest industrial project in Brazil and the first China-Brazil joint venture.

In 2009, Chery product entered the Brazilian market with the Tiggo SUV. Chery also developed a flexible fuel vehicle for the Brazil market. So far, Chery has sold more than 80,000 vehicles in Brazil.