Oct 24, 2011|22 hits
On August 19, the signing ceremony for the strategic cooperation agreement between Chery and the China-Africa Development Fund (CADFund) was held in Hefei. Leaders of the Anhui Provincial Government, CAD Fund and Yin Tongyue, chairman of Chery and Zhou Biren, general manager of Chery International were present.
Under the agreement, Chery will establish a joint venture with CADFund to comprehensively integrate Chery’s automobile operation in Africa, to actively cultivate and develop the African automobile market, and to boost Chery’s internationalization. The joint venture, Chery Overseas Industrial Investment Co., Ltd., has a registered capital of RMB 1.265 billion. The two parties will, based on the business development of the joint venture, progressively increase the registered capital to RMB 3.25 billion (about USD 500 million), with a contribution of 55% from Chery and 45% from CADFund. After establishment, the joint venture will offer strong financial support for Chery’s automobile operation in Africa. The major business of the joint venture is to help Chery invest in major African countries, establish plants and automobile financial companies, offer automobile financial and consultation services to the African automobile market, and provide subordinate project companies with financing and financial consultation services. With strong financial support, Chery’s projects in Africa will be smoother.
CADFund is one of the eight moves in China-Africa cooperation announced by Chinese President Hu Jintao at the Beijing Summit of the Forum on China-Africa Cooperation in November 2006, as well as China’s first equity fund focusing on supporting domestic enterprises in investing in Africa. CADFund has a total scale of USD 5 billion, and the initial capital of USD 1 billion was contributed by China Development Bank. CADFund is committed to encouraging and supporting Chinese enterprises in cooperating with Africa and providing management, consultation and financial consultation services to Chinese investors in Africa.
Africa is an emerging and promising automobile market with 53 countries and a population of nearly 900 million, in which automobile demands are exploding. As the free trade zone for 26 African countries will be established soon, trade tariffs between countries in the zone will be reduced greatly, which will speed up the integration of the regional economy, thus propelling Africa to become one of the world’s most important emerging automobile markets. Since entering Africa in 2003, Chery has developed rapidly in major markets such as Egypt and South Africa. Particularly, in Egypt, it took Chery only five years to develop four welding lines for DME Assembly Plant with an annual output of 15,000 units. In 2007 and 2008, Chery sold 12,000 units and 16,000 units in Egypt respectively. Affected by the international financial crisis in 2009, Chery’s sales declined a bit. However, in 2010, Chery achieved record sales of 18,000 units, raising Chery’s market share in Egypt to 7.4%.
Chery’s first step to enter Egypt was to establish a manufacturing base in Egypt to localize 45% of parts. Chery has not only brought technologies and management to Egypt, but also boosted local employment and taxes, thus gaining high recognition and strong support from the local government. Based on the adjustment in Egypt’s national automobile industry policies and its trading relations with peripheral countries, Chery values Egypt as a key area in its strategy of “going out”, established a plant in Egypt, and radiated its operation to peripheral countries, thus effectively promoting the development of the Middle East and North African markets, and even affecting European and American markets.
The reason for choosing Chery as a partner is that CADFund took a fancy to Chery’s tremendous technical strength and elaborated overseas strategy. With the establishment of the joint venture, Chery will develop even faster in Africa. Chery will bring not only cost-effective cars, but also more cutting-edge technologies and job opportunities to Africa, thereby contributing to the development of Africa and China-Africa friendship.