Chery Automobile (Part 1): Strategic shift in own-brand business

Consolidation to single brand; enhancements to commercial vehicle business

2014/07/16

Summary
Mid-term business plan for Chery brand
A strategic tie-up for compact vehicles with Guangzhou Automobile Group
To expand commercial vehicle production in China
(Reference) Production volume of Chery Automobile's own-brand vehicles

Summary

Chery Automobile: Production Volume in China This two-part report describes a summary of operational developments at Chery Automobile, a leading Chinese automaker. This first report focuses on the company's mid-term business plans for its own-brand models and the recent moves for production in China. The second report will focus on its joint venture businesses with Israel Corporation, Jaguar Land Rover (JLR) and other foreign manufacturers, as well as Chery Automobile's oversea business.

* Signs of leveling off seen in sales in China and export

Chery Automobile's passenger car sales in China and factory shipment including export are showing signs of leveling off since its peak in 2010. Its production and sales in the first four months of 2014 slightly declined year-over-year.

* Major shift from sales expansion with low-priced models to sales of high-quality models; layoff of 9,000 workers

In 2013, Chery Automobile announced that it had laid off 9,000 workers in its own brand business. In addition, the automaker announced policy shift in its vehicle assembly business. The company's direction diverted from expansion in unit sales to more profit-oriented business by introducing vehicles with higher quality, better equipment, and higher profitability. In line with the policy change, the company is now reducing production of the Chery-brand vehicles for a while.

* Consolidation from four brands to a single brand

The company had four brands-the Chery, Karry, Riich and Rely, when it was aiming for the unit sales expansion. As the brand-oriented strategy has been converted, the four brands were consolidated to the single Chery brand.

Chery Automobile introduced four new-generation strategic models in recent years (the Arrizo 7, E3, and Tiggo 5 in 2013, and the all-new QQ in January to April 2014). The production ratio of the four models in the company's overall passenger car production volume is increasing from 10.6% in 2013 to 43.3% in 2014.

* Partnership with other manufacturers

Chery Automobile has joint ventures with foreign manufacturers such as the Qoros-brand cars with Israel Corporation and Jaguar- and Land Rover-brand cars. Additionally, the company has concluded partnership with Guangzhou Automobile Group aiming for more efficient utilization of business resources.

Production of Chery Automobile's own-brand vehicles

Type		2010	2011	2012	2013	Jan.-Apr. 2013	Jan.-Apr. 2014
Passenger cars	Sedan/Hatchback	509,304	466,678	409,132	334,055	122,150	82,313
	SUV	82,687	115,205	119,109	94,880	30,583	36,113
	MPV	30,635	16,812	5,278	7,768	2,014	2,356
	Mini van	61,963	30,691	17,046	22,580	9,387	6,025
	Total	684,589	629,386	550,565	459,283	164,134	126,807
Commercial vehicles	Mini truck	7,335	6,345	11,838	17,408	7,166	6,896
	Light bus	0	1,692	1,548	475	125	467
	Total	7,335	8,037	13,386	17,883	7,291	7,363
Total own-brand of Chery Automobile		691,924	637,423	563,951	477,166	171,425	134,170

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