Logistics cost and strategy considerations are behind Chery Auto’s decision to build a new plant at the port city of Dalian in northeast China. The $688m plant will start manufacturing for both the domestic and overseas markets from June 2011, with an annual production capacity of 200,000 vehicles.
“Building a plant in a port city will greatly reduce our export logistics costs,” said Yin Tongyue, president of Chery. “This will give Chery a competitive edge when exporting to other countries.”
It is the first domestic plant that Chery has built outside its home in Wuhu, Anhui province, further south, and the company believes that, as well as export advantages to other countries, being in Dalian will give it better access to the market in northern China including Beijing, Tianjin, Hebei and Shanxi.
The facility will be located in the Dalian Bonded Area, a 1.25km2 part of the Dalian Economic and Technological Development Zone, which has been targeting automotive and spare parts suppliers since it set up a dedicated agency last year to promote its benefits for the sector. “Chery’s move to the bonded area is the first fruit of this initiative,” said Lu Lin, director of the area’s administrative committee.
Chery has an annual production capacity of 450,000 vehicles at its plant in Wuhu and is aiming to increase this output to 1m units by 2012.
This year it is targeting exports on small markets including Nigeria and Uruguay. Last month it submitted a proposal to Nigeria's Cross River State government to set up a plant in the region for assembling up to 10,000 cars annually. Chery entered the Nigerian market in 2006 with models including the Tiggo SUV, QQ compact car, Fulwin and Eastar sedans. They are distributed by local subsidiary Chery Motors Nigeria.