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Chinese automaker plans assembly line in Malaysia
New York Times, 19 October '04
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» Chinese automaker plans assembly line in Malaysia
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The Chery Automobile Company, a fast-growing Chinese automaker, said on Monday that it planned to assemble cars in Malaysia, a big overseas step for the expanding Chinese auto industry. But the move is likely to generate fresh controversy about Chinese protection of intellectual property.

Chery has been at the center of disputes with General Motors and Volkswagen over whether it has copied their vehicle designs - accusations that Chery has repeatedly denied.

G.M. responded within hours to news of Chery's Malaysian plans by saying that it would fight to prevent violations of its intellectual property rights wherever they might occur.

The Alado Corporation, a closely held company with links to BSA International, a Malaysian manufacturer of alloy wheels, announced in a statement on Monday that it would first import and later assemble the Chery QQ subcompact car and the Chery B14 minivan in partnership with Chery. The vehicles are to be sold in Malaysia and distributed across Southeast Asia.

A Chery spokesman confirmed that the company would build a factory in Malaysia, but declined to provide any details, including the identity of its joint venture partner. Bloomberg News reported from Kuala Lumpur that two Malaysian newspapers had reported claims by other companies that they, not Alado, had the legal rights to import Chery cars. An Alado spokesman declined to elaborate on the company statement. Chery is based in Wuhu in Anhui Province in eastern China and is owned by the provincial government.

Chery's plans for Malaysia represent the first big attempt in the auto industry to make use of Malaysia's growing willingness to lower trade barriers for automobiles, said Paul Blokland, the director of Segment Y Automotive Intelligence, an automotive consulting company in Bangalore, India.

After many years of protecting Proton, a government-controlled automaker, Malaysia is now starting to yield to pressure from other Southeast Asian nations to lower steep import duties on assembled cars. "Chery is taking advantage of Malaysia having to open up," Mr. Blokland said, adding that two small Malaysian makers of very small, inexpensive cars, Inokom and Perodua, were likely to be more affected than Proton, which builds larger models.

More than 300,000 passenger cars are sold annually in Malaysia, making it the largest market for cars in Southeast Asia. But Malaysia trails Thailand in overall light-vehicle sales because the pickup truck market is much smaller in Malaysia than in Thailand.

G.M. complained more than a year ago to China's Ministry of Commerce that the Chery QQ too closely resembled the Daewoo Matiz and the essentially identical Chevrolet Spark, a subcompact introduced last winter in China. G.M. holds a controlling stake in Daewoo.

Rob Leggat, the vice president for corporate affairs of the G.M. Daewoo Auto and Technology Company, said in a statement that while G.M. had not been in touch with Chery and Alado to confirm their plans in Malaysia, "we can reiterate that we have serious concerns about the abuse of our intellectual property rights relating to the Matiz/Spark."

He added that, "we would have those same concerns and we would work just as aggressively to protect our intellectual property rights regardless of where in the world the abuse takes place."

Chery is preparing to assemble cars in Iran from kits shipped there. That venture has been controversial because the car being produced has some similarities to the Seat Toledo, a Volkswagen model.

The Shanghai Automobile Industry Corporation, which has separate auto assembly joint ventures with G.M. and Volkswagen, recently sold its 20 percent stake in Chery after strong protests from G.M., which contended that Shanghai Automobile's many ties represented a conflict of interest.

Volkswagen had no immediate comment on Chery's plans to enter the Malaysian market. Alado said in its statement that it would initially import fully assembled Chery QQ cars, but planned as early as next year to assemble QQ cars and B14 minivans with Chery, using Chinese and Malaysian parts. The goal, Alado said, would be for 40 percent of the cost of the vehicles to be incurred in Malaysia, to qualify for trade preferences in shipping them to other Southeast Asian nations.