Chrysler, Chery come together

DaimlerChrysler's US arm is joining forces with China's Chery Automotive Co. to build small cars in China that will be sold in the United States and around the world. Chinese state media in Beijing also confirmed that a deal between the US and Chinese auto makers had been reached under which Chery will build small cars for the Chrysler Group, a unit of the German-US giant.

According to international meida, Chrysler spokesman Jason Vines said Chinese-produced vehicles would be sold under its Dodge, Chrysler and Jeep brand names. "It will be a Chrysler Group brand," he said. Chrysler hopes to sell initial models in the US within the next 24 months. Tom LaSorda, Chrysler's chief executive, said at the recent Auto China 2006 show that his company was in talks with Chery on building small, B-class size cars, and hoped to complete the discussions "by the end of the year".

He said Chrysler wanted to triple its sales in China to 100,000 units in four years. The company has also been seeking to develop a small, economical car to pad out its US model line up as consumers appear keener to seek out more fuel-efficient vehicles. Competition in the US market for smaller, more economical cars has hotted up this year. General Motors recently announced plans to import European-made Opel cars which will be sold through its Saturn dealer network.

The Beijing Morning Post said Chery would offer Chrysler an attractive, low-cost production platform and roll out vehicles that can be marketed around the world. The development is significant and marks an important milestone for the Chinese car industry. Critics sneered when some of the country’s homegrown cars like the Geely were on display at the Frankfurt and Paris Motor Shows but China’s manufacturers were clearly undeterred by the reception. Apart from the fact that the country’s automobile sector has been registering incredible growth in the last few years, the government is also determined to give a fillip to the local industry. The fact that Shanghai Auto took controlling stake in Ssangyong coupled the recent buyout of UK’s Rover by Nanjing reflect a level of aggression that just cannot be wished away.

What does this mean for the Indian automobile industry? It had better not take its Chinese counterpart for granted, at least on the quality front. While manufacturers here have openly admitted that it is impossible to compete with China at the low-end, they have been quite confident (some would even say cocky) about the huge quality gap between the two countries. The Chinese are rapid learners and the fact that they are master plagiarists could also be construed as possessing a keen mind to adapt to a new situation. Sure enough, IPR issues will continue to be a problem for a while but China is equally determined to convince the world that it is as good as the best in quality.

The Chery alliance should be taken seriously by India especially when this involves sale of cars in the US market. Of late, it is only Mahindra & Mahindra that has announced its intent to launch the Scorpio there and at best, multinationals in India will use the country as a hub to export cars to advanced markets worldwide.