Chery mulls move to microbus market

Chery Automobile Co hopes to build a 1.77 billion yuan plant in central China's Henan province to further tap the fast-growing microbus market, according to local government sources.

Chery President Yin Tongyao recently met in Zhengzhou with Xu Guangchun, secretary of the Henan provincial Party Committee, and agreed to build a sprawling auto plant in nearby Kaifeng with an annual production capacity of 200,000 microbuses, 80,000 light-duty trucks and agricultural machines.

Following central government incentive policies to promote vehicle sales in the vast countryside, the microbus market has turned appealing and attracted many automakers including Chery.

Sales of China-made microbuses surged by more than 60 percent year-on-year to 1.08 million units in the first seven months of this year, according to market data.

Chery, based in Anhui province in central China, launched its micro-vehicle brand Karry in January and plans to offer four new micro models this year.

Xu said that with a population of 100 million, Henan itself is a promising auto market, especially for microbuses.

In fact, Henan already ranks second on Chery's list of provincial markets after Shandong and is already considered an independent business zone by the company.

The vehicle maker's sales and service network now extends to towns and remote villages in the province.

Xu also added that Henan's long-established advantages in producing and processing raw materials as well as its convenient transportation are a great benefit to carmakers.

Chery's future Kaifeng branch can also benefit from preferential policies as part of the province's strong ambition to develop the auto industry.

Yet the project still faces an obstacle.

In an effort to minimize overcapacity, the Ministry of Industry and Information Technology issued a document last month that said auto companies are prohibited from building factories in other provinces.

To bring the new project to fruition, the Anhui-based company now has to choose a local partner, which has aroused guesswork about the candidates.

Recent reports said Chery will merge with Shaolin Auto, an obscure bus maker in Henan, to make its microbus project come true. However, both Chery and Shaolin have denied the rumors.

Chery sold 356,000 vehicles last year. Its sales volume has topped homegrown brands for eight straight years.

(China Daily 09/21/2009 page5)