Meanwhile, Chery is also negotiating with Italian icon Fiat on a joint venture, seeking to expand its exports and gain technology to upgrade its products.
Chery’s good luck goes far even beyond this. The local government-owned automobile company, in Anhui province,  is now becoming the favorite of state-owned enterprises and the central government as a whole. And the National Development and Reform Commission approved, in January, 2008, a joint venture between Chery and Quantum LLC, a US-based finance company, with a total investment of $950 million. The joint venture will mainly produce Chery’s high-end automobiles and related components and fittings at a new factory in Wuhu, Chery’s home town, and sell and distribute them across the world.
Chinese oil company Sinopec has also established a strategic partnership with Chery. According to their agreement, Sinopec provides hi-tech oil products for the research, development and production of Chery’s cars, as well as the technical support for Chery’s R&D in green alternative energy. In return, Chery’s new automobiles will use Sinopec’s products,
Chrysler reached an agreement with Chery in July 2007 on the production of Chrysler cars sold in North America and Europe. According to the agreement, both parties participate in the design of a new car on the basis of Chrysler’s current pattern. The car produced by Chery will be sold under the Chrysler or Dodge brand.
Chrysler has been talking to Chery since the decision for its separation from Daimler Chrysler was made. With a strategic framework and technology cooperation already in place, moving on to a joint venture project with Chery is not surprising.
Industry insiders believe that the cooperation with Chery will promote Chrysler’s localization process in China, and Philip Murtaugh, Chrysler’s newly appointed CEO for Asia Operations, may be the catalyst. Mr. Murtaugh worked for GM for 32 years, and promoted the joint venture project between GM and Saic Motor, a Shanghai-based automaker. Mr. Murtaugh worked as vice executive president of Saic Motor afterwards, and is well versed in the Chinese market.
Chrysler’s joint venture with Chery may largely influence the future development of Beijing Benz- DaimlerChrysler Automotive Co., Ltd (BBDC). Since Chrysler separated from Daimler Chrysler, BBDC is faced with an uncertain future. The company intended to separate into two individual joint ventures between Beijing Automotive Industry Holding Co., Ltd., and Daimler and Chrysler individually, but could not gain official approval.
Chrysler’s cooperation with Chery will not much affect BBDC’s business. It is normal for overseas automakers to establish more than one joint venture out of strategic considerations. BBDC is still active, having recently launched a new car in the Chinese market, indicating that Chrysler is not ready to quit BBCE, at least in the short term. But Chrysler management admitted that the company may in the future participate in BBDC operations by way of technology transfer instead of equity cooperation.
Industry insiders believe Chrysler will not drop equity cooperation with Beijing Automotive due to the importance of the Beijing market.
Chery has stated plans to sell 480,000 vehicles in 2008, 300,000 in the domestic market and 180,000 overseas. However, Chery’s negotiations with Fiat, which started last year, have not so far yielded any outcome, suggesting Chery’s planners may be getting ahead of themselves.
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