Chery embarks on ambitious plan
29 Jul 2024
Chery’s substantial investment of over RM1 billion in Malaysia signifies a bold departure from past strategies as it chooses to make a significant independent market entry, eschewing reliance on distributors.
The Chinese carmaker’s comeback effort to establish Malaysia as a pivotal Asean automotive hub for local and export markets could benefit notable automotive parts manufacturers such as Feytech Holdings Bhd and DRB-HICOM Bhd.
Affin Hwang Capital automotive analyst Afifah Ishak said Chery was targeting the right-hand drive of both the local and export markets including Singapore, Thailand, Brunei and Australia.
The plan kicks off with an estimated 500 units of Chery models for export in 2024, with the carmaker expecting a three-year compounded annual growth rate of 189 per cent to 12,000 units in 2027.
“We believe that Chery Malaysia’s position is solid, on the back of the recent establishment of its own CKD plant and the appointment of large dealers’ networks across each state in Malaysia,” said Afifah, who visited Chery’s first local CKD plant in Shah Alam recently.
The plant was developed at a cost of RM125 million which began operations in June this year, five months after construction commenced.
It includes a training centre, an R&D centre and the final assembly line for the Jaecoo J7 SUV which is assembled in two variants – the 2WD and AWD with prices ranging between RM138,000 and RM148,800.
The plant has an annual production capacity of 35,000 units and is currently operating at a 50 per cent utilisation rate.
Existing assembly plant in Kedah still producing
Chery’s existing assembly at the Inokom plant in Kulim, Kedah still continues, focusing on four of its SUV models – Omoda 5, Tiggo 8 Pro and the newly-launched Tiggo 7 Pro, and Omoda E5 electric vehicle.
“We understand that Chery plans to expand its capacity at the Inokom plant, to cater to the assembly of its newly-launched models. Nevertheless, we believe that the capacity expansion would take some time to materialise as Chery enters the Inokom plant without any equity stake.
“Hence, it is likely to have a lower priority compared to other auto players with equity ownership
in the plant, such as Sime Darby Bhd (51 per cent stake), Bermaz Auto Bhd (29 per cent stake),
Hyundai Motor Company (15 per cent stake) and Sime Darby Hyundai (5.0 per cent stake),” Afifah noted.
Currently, Chery’s annual production capacity at the Inokom plant stands at 6,000 units, which accounts for about 15 per cent of Inokom’s overall annual production capacity of 38,000 units.
Multi-brand strategy
Chery adopts a multi-brand strategy by introducing its sub-brands in Malaysia, said Afifah.
It began with the introduction of Omoda and Tiggo in July 2023, followed by the upcoming launch of Jaecoo in July this year.
Additionally, another sub-brand, Exceed, is expected to launch by 2027.
However, Jetour, despite being under the umbrella of Chery International, is expected to enter the Malaysian market in the second half of 2024 and operate as a distinct entity with its own separate management team, independent from Chery Malaysia.
“The multi-brand strategy is a common approach among Chinese automotive companies, typically executed through the creation of separate sub-brands or partnerships with third parties to develop new brands,” Afifah said.
Chery initially marked its first presence in Malaysia back in 2005 through Chery Alado as its authorised distributor, offering both CBU and CKD lineups.
The CKD models were locally assembled at Oriental Assemblers Sdn Bhd’s plant in Johor. However, Chery’s last operation in Malaysia was in 2017 which struggled with overall sales of only 137 units.
Leveraging Chery’s Asean ambition
Automotive parts suppliers are set to gain from Chery’s efforts to position Malaysia as an Asean automotive hub.
Afifah said Chery’s ongoing CKD assembly expansion for local and export markets has resulted in a noteworthy achievement of 57 per cent localisation of automotive parts through collaborations with 15 local vendors.
This surpasses the required 40 per cent under the National Automotive Policy 2020.
“We gather that key automotive parts suppliers such as Feytech Holdings, APM Automotive Holdings Bhd and DRB-HICOM are integral to Chery Malaysia’s supply chain,” she said.
Source: NST
