Going global

Chery is acutely aware that development for the brand means seeking global options. According to Jin Yibo, assistant to Chery's president, the share of overseas market has taken up to 35 percent of the enterprise's total market. "Due to the restructuring of the Chinese economy and the cooling of the overall car market, exports declined dramatically in the past year. Despite this, Chery saw a steady growth in exports," Jin told ChinAfrica.

In May and June this year, exports of Chery exceeded 20,000 units for two consecutive months, a record for Chinese auto exports. From January to July, 2012, the company sold 112,014 vehicles in foreign markets, an increase of 26.1 percent year on year. About one third of Chinese autos exported during the first half year of 2012 were made by Chery, and it has been the biggest Chinese brand of passenger vehicles exporter for nine consecutive years.

Chery's overseas layout began with exporting finished vehicles. Due to high tariffs, high transportation costs, long delivery periods and industry boycotts of selling finished vehicles in foreign markets, Chery took initiatives in localization by establishing joint ventures or sole-invested overseas CKD (Completely Knocked Down) factories and providing them with manufacturing technologies, CKD, engines, and sales and management skills. Currently, it has built up 16 CKD factories in countries like Egypt, Uruguay, Brazil and Russia, and manufactured tailored vehicles for local consumers. Chery has exported its cars to more than 80 countries and regions all over the world, and established a sales and service network of 1,153 branches.

"In the process of globalization, we gradually localize the products and the working staff to deepen cooperation," said Jin.

Taking Egypt as an example, Chery's CKD factory in Cairo was the second largest Chinese project in the country after that of Huawei, recruiting about 2,000 locals. An estimated 40 percent of auto parts were provided by local suppliers. And the factory had an annual production capacity of about 20,000 to 30,000 vehicles, which ranked third among all vehicles brands sold in Egypt.

Zhang said Chinese automakers like Chery had several advantages when going abroad. After many years of development, since the late 1990s they had made great strides in quality, technology and management.

As the biggest export destination of Chinese automobiles was emerging markets, Zhang said the value of these achievements were more profitable in overseas markets.

This view was echoed by Jin. "Unlike in the domestic market, where Chery stands out with advantageous price-quality ratio, Chery is more competitive and makes more profits in foreign countries," he said, explaining that Chinese brands are well received overseas thanks to its growing economy. "By virtue of this, Chery's image is also elevated. Our vehicles can be priced at the same level as those from South Korean automakers, which generally sell at higher prices in Chinese domestic markets," Jin added.

Another advantage is that Chinese automakers don't necessarily do many market surveys when going abroad as customers' demands and income levels in the emerging markets are similar to those in China, said Zhang. Moreover, the competition between Chinese auto producers and trans-nationals is less fierce in overseas markets. Initially China's automakers targeted the medium- and low-end markets, while their foreign competitors focused on the urban high-end market. "Before 2005, they operated separately and had little competition, which is now reflected in the overseas emerging markets, making the huge potential there an opportunity for Chinese automakers," said Zhang.

Local assimilation

Like other Chinese enterprises going abroad, Chery encountered problems when integrating into foreign domestic markets. "The biggest problem was cultural differences," said Jin. He said the Chinese habit of working late and long hours is not followed in Latin America and Africa.

"We respect locals' mindsets and follow their working style. Facing such conditions, Chinese technicians will take the lead and do some work supposed to be done by local employers," Jin added. He said Chery gained popularity and support overseas among local people and authorities as it brought skills and jobs, worked with local suppliers and was socially responsible.

In Jin's eyes, when enterprises went abroad, they bridged the people-to-people exchanges between the two countries. "By doing business in Latin America or Africa, we learned the local culture and customs. And the locals also witnessed Chinese virtues of hard work and diligence, as well as our company's philosophy of creativity and dedication," said Jin.