The Chinese manufacturer Chery wants its vehicles to have the “made in Mexico” label and is already considering three alternatives to achieve it: buy a plant from another assembly plant, build its own or look for a local partner who can carry out the final assembly of the units.
Until now, Chery has met with governments and assemblers in the main automotive manufacturing enclaves in the country, from Coahuila and Nuevo León, to Jalisco, Aguascalientes, Guanajuato and the States of Mexico.
“We are looking at alternatives,” says Alex Lee, country manager for the Central and South American region of Chery International, which is the division in charge of operations outside of China, in an interview. “The investment range for this project is very wide, it could go from 100 million dollars to 1,000 million,” he details.
Chery, which will officially start marketing its models under the Chirey brand in June, is looking to have a plant in Mexico with a view to being able to export to the United States and Canada in the next five years, or perhaps a little longer. “We are waiting for the right (political) moment,” says Lee.
Although the highest representative of the brand in Mexico acknowledges that it is still too early to believe that the United States government will open the window to Chinese players, having a plant in North America is part of the strategy and right now Mexico is the best option within of the region to install it. “It is not our priority now but we are walking in the conversation”, reveals the manager.
Will buy the plant from Daimler or Honda
Buying a vehicle factory is not something new for Chinese manufacturers. Great Wall Motors, one of the largest private car manufacturers in China, acquired in August 2021 the car plant that Mercedes-Benz deactivated eight months earlier in Brazil and in which it produced the C-Class sedan and the GLA SUV.
Lee said that they have had conversations with Daimler about the possibility of acquiring the plant that the German manufacturer operates jointly with Nissan in Aguascalientes and where they produce the models of its premium brands Mercedes-Benz GLB, Infiniti QX55 and Infiniti QX50.
This plant, which was initially thought to assemble up to 300,000 units a year, has been underutilized for at least two years. In 2021, the complex assembled 100,118 units: 74,337 GLB; 18,431 from Infiniti QX55 and 7,350 from Infiniti QX-50, according to Inegi data.
Chery has also held talks with Honda about the possibility of acquiring the plant in El Salto, Jalisco, which in 2019 concluded the operation of vehicles and which
Lee says that buying a vehicle plant “is easier and faster” than setting it up from scratch, but he doesn’t rule out this possibility either.
Install your own plant
Chery has also held meetings with state governments, including those of Nuevo León, Coahuila, and the State of Mexico, among others, to analyze the possibility of setting up its own complex. “If this were the case, we would need land and other incentives to be able to have a plant in the country,” says Lee.
Building a plant from scratch can take anywhere from one to four years to start up. However, the project to export from Mexico to the United States and Canada is in the medium term, and Chery would have the advantage of being able to choose a strategic location to do so.
An alliance with a local manufacturer
The Chinese manufacturer is also analyzing the possibility of having a local manufacturing partner that can carry out the tropicalization of the models and their final assembly for the Mexican market. “A similar model to what Jac has with Giant Motors,” says Lee.
This scheme is well known to Chinese manufacturers as they themselves are the ‘local partners’ of foreign manufacturers who have come to China. Chery is Jaguar Land Rover’s local partner in the production of Jaguar Cars and Land Rover vehicles in China.
Several of the Chinese manufacturers that have ventured into Latin America have done so with a local manufacturing partner. When Baic arrived in Mexico in 2016, it established an alliance with the local manufacturer AT Motors for the final assembly of two models, a sedan and an SUV, in a warehouse in the municipality of Puente Nacional in Veracruz. This alliance, however, ended and the Baic models that Grupo Picacho sells in Mexico are imported directly from China.
Jac has an alliance with Giant Motors Latin America -which has the participation of the Slim and Massri families-, so that the Mexican company is in charge of the tropicalization, assembly and sale of vehicles and spare parts to the dealer network.
Chery will officially launch its Chirey brand in June and a network of 40 dealers. The Chinese manufacturer expects to reach a sales volume of 7,000 units in its first year of sales. “This would be a very good number for us,” says Lee. However, the minimum sales volume that Chery would have to achieve in the country to justify local assembly is 35,000 units.
