When the Chinese auto market moves into the “new normal” of micro growth, competition intensification and gradual saturation of domestic capacity, how will Chinese automakers break the ice? We may have found the answer from Premier Li Keqiang’s journey of four Latin American countries.
Li has recently visited four Latin American countries, and signed a framework agreement on capacity investment and cooperation in the first leg–Brazil. Brazilian。 President Dilma Vana Rousseff，In his address, he gave a revelatory answer by introducing Brazil’s proposed capacity cooperation projects with China with great familiarity, and enumerating Chinese companies involved in these projects such as Chery. The answer is that Chinese automakers must take full account of the global market, map out the strategy of global integration, go global boldly, and transfer out the superior capacity of China’s relevant industries based on the country’s guiding opinion on advancing international cooperation in capacity and equipment manufacturing. This may be the best way for Chinese automakers to get out of the mire of cut-throat competition in the domestic market, enhance their strength and go global.
Chery enters new stage of globalization through policy-driven active cooperation in superior capacity
Since the beginning of this year, the globalization of China’s equipment manufacturing has been elevated to the strategic level, and the government has intensified support for capacity and equipment globalization. In April, Premier Li Keqiang chaired the Seminar on the Globalization of Chinese Equipment and Advancement of International Capacity Cooperation, and made corresponding arrangements at the executive meetings of the State Council twice. The Guiding Opinion of the State Council on Advancing International Cooperation in Production Capacity and Equipment Manufacturing has been released, proposing that efforts should be made to promote the globalization of key industries such as railway, power, automobile, construction machinery and aerospace in ways such as trade and investment with neighboring Asian countries and Africa as key targets of cooperation. The globalization of capacity is not the globalization of backward and eliminated capacity, but the globalization of superior and advanced capacity. The globalization of China’s capacity exactly agrees with Latin American countries’ strong demand for infrastructural construction, and can totally achieve win-win results.
At the China-Brazil Business Summit organized by the Ministry of Commerce of the People’s Republic of China and the Ministry of Development, Industry and Foreign Trade of Brazil on May 19, witnessed by Brazilian President Dilma Vana Rousseff and Chinese Premier Li Keqiang, Chery and Jacarei signed an agreement on the project of Chery Brazil Industrial Park. While further deepening China’s capacity cooperation with Brazil and Latin America and enhancing Chery’s competitiveness in the Brazilian market, the project will advance the development of Brazil’s auto industry. During attending the China Equipment Manufacturing Exhibition in Rio de Janeiro subsequently, Li visited Chery booth with interest, inquired about the production and adaptive development of Chery Brazil Plant, and gave praise after getting a positive answer.
As the first Chinese independent automaker that has built a plant in Brazil, Chery has been recognized by the Chinese and Brazilian governments for its localization exploration in Brazil.
Chery’s globalization started earlier actually. In 2001, Chery exported the first batch of 10 cars to Syria to initiate its globalization strategy. In recent 15 years, Chery has persistently developed and explored globalization. So far Chery has established 16 manufacturing bases, over 1,100 distribution outlets and over 900 service stations abroad, covering markets such as Asia, Europe, Africa and Latin America, and has exported products to over 80 countries and regions. Chery had achieved cumulative exports of over 1 million units by 2014 and has led the country in annual exports for 12 consecutive years.
Meanwhile, Chery has found it needs to carry out international cooperation in the whole industry chain, integrate global superior resources and improve its capacity for system innovation with the deepening of globalization, so as to access a broader international market. Chery has worked with over 10 enterprises among Fortune Global 500 such as Bosch, Bayer and Valeo in fields such as engine technology, new materials technology, information technology, automotive electronics, interior & exterior and automotive lighting. The model of whole-industry-chain cooperation has laid a solid foundation for Chery to enhance its comprehensive strength and advance cooperation with developing countries in superior capacity.
Besides, Chery has kept to the road of independent innovation. Since strategic transformation in 2010, Chery has built a product R&D system geared to international practice, streamlined and improved its original product development process, oriented R&D system reform on target customers, and established a globalized product design and development process, thus comprehensively improving its system capacity and leaping from “made in China” to “made with wisdom in China”
To ensure that Chery Brazil Plant is built according to advanced and latest world standards, it is ranked top among Brazilian automakers in terms of area and production capacity. To ensure the high quality of every vehicle, the plant’s welding, painting and assembly shops are equipped with internationally advanced production technologies and equipment. For example, the welding shop uses advanced de-dusting equipment from Nederman for centralized processing of welding guns so that welding guns can directly absorb particles via gun heads to effectively increase working efficiency and avoid inhalation, thus protecting operators’ health. The painting shop is designed and constructed according to the highest international standards, too. The shop uses EcoRP spray painting robots from Durr. Compared to traditional mechanical spray painting, such robots have two prominent advantages: saving the quantity of spray guns by some 30 percent to 40 percent, increasing the speed of spray painting and production efficiency. Apart from world top painting equipment and processes, water paint used by the plant greatly reduces VOC emission to the minimum, achieves a technical breakthrough in environmental protection and is currently one of the world’s most advanced technologies.
Apart from the vehicle manufacturing base, Chery will establish branches around the vehicle assembly plant according to market situation and the plant’s operation conditions, bring together an array of fine parts suppliers, accomplish localization in the whole industry chain in Brazil, and gradually gear its operation to multinational companies’ operation modes, thus becoming a globalized enterprise.
Over the years, to adapt to Brazil’s road conditions and oil products and local consumers’ driving habits, Chery has made great efforts on adaptive development and improvement. For example, to meet Brazil’s special demand for oil products, Chery specially designed and developed Flex Fuel engines, etc. In terms of employee localization, Brazilian employees currently account for 70 percent of all employees of Chery in Brazil and the percentage will reach 90 percent in the future. All these have further consolidated Brazil’s role as Chery’s strategic core market.
Extending from Brazil to rest of Central and South America
Brazil is South America’s largest economy as well as one of BRICS countries. With annual vehicle sales of some 3.5 million units, Brazil is the world’s fourth-largest auto market. Thus, key multinational auto groups in the world flocked into Brazil, showing full market competition and high technical requirements for products. Besides, Brazil imposes high tariffs on imported vehicles and sets rigid regulations for auto industry access. Therefore, establishing manufacturing bases and automotive industrial parks in Brazil will effectively avoid the impact and risk from fluctuations in tariffs, industrial policies and exchange rates. Additionally, succeeding in such a competitive market is of great significance to self improvement and globalization enhancement.
The project is Chery’s another major strategic move to advance localization in Brazil. Based on Chery vehicles, the park will bring in relevant automotive parts manufacturers. This will boost Chery’s proportion of localization and enhance the competitiveness of its products in Brazil. More importantly, the establishment and perfection of the auto industry chain in Brazil will enable Chery to gain a firm foothold in Brazil and extend to the rest of Central and South America, so as to enhance its market share and influence in this region.
As Chery constantly advances the localization strategy in Brazil, eventually accomplishes the localization of R&D, purchase, manufacturing and staff management, and highly integrates its advanced technologies, brands and corporate culture with the local market, Chery Industrial Park will be an important symbol for Chery’s globalization and a successful model for the globalization of Chinese enterprises then.
