In an attempt to enter the US and European markets in a big way, well-known Chinese carmaker Chery Automobile Co known for making low priced cars has entered into a joint venture with Quantum LLC, the U.S. subsidiary of Israel Corp, based in Israel and listed in the Tel Aviv Exchange. The joint venture Chery Quantum Automobile has been registered at the administration of industry and commerce in east China's Anhui Province, Chery officials said.
Quantum LLC will hold a 45 per cent stake in the joint venture which it has bought for $225 million. Chery will provide the land as well as technology and will hold the controlling 55 per cent stake in the venture. The two companies will together make a total investment of $1.5 billion in the joint venture, said to be the biggest joint venture in East China's Anhui province so far.
According to a statement from the local government of China's Anhui province the aim of the new venture, is to develop Chery's own core technologies and high-end products and to actively get involved in global competition.
Chery has developed keen technological prowess owing to the fact that it has never had a major foreign joint venture partner with which to share vehicle technology. As a result, it has a well-established model development and research and development (R&D) department that has developed a full range of passenger cars.
Chery officials said the joint venture will enable Chery to add larger models because of the rising competition in China's car market. They said the new models may have six-cylinder, 3-litre gasoline engines.
Quantum will also benefit through the venture, as it will now be able to enjoy a presence in China the fastest growing automobile market globally.
According to the National Development and Reform Commission, the joint venture will produce both for the domestic and global markets.
Chery's vehicle sales are expected to touch 480,000 units this year having risen 24.8 per cent year on year to 381,000 units in 2007.
The company's exports jumped 132 per cent to 119,800 units in 2007 and are expected to rise to 180,000 in 2008.
Chery plans to build more plants abroad as part of its global sales strategy. Chery sells cars in 56 foreign countries. The company currently has seven plants in six foreign countries; Iran, Russia, Ukraine, Indonesia, Egypt and Uruguay. The company plans to have 14 overseas factories by 2010 that will assemble its own brand of cars.
The company is now targeting to set up factories in India and Argentina.
Chery has already formed a joint venture with Fiat SpA to produce Chery, Fiat and Alfa with an annual capacity of 175,000 units, for both the domestic and overseas markets. Last year it signed a deal with Chrysler to produce small cars under license for the US and European markets.