Segment Y Automotive Header  
Chinese firm plans car plant in Malaysia
International Herald Tribune, The New York Times, 19 October '04
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» Chinese automaker plans assembly line in Malaysia
» Chinese firm plans car plant in Malaysia

A Chinese automaker will begin assembling cars in Malaysia with a local partner there, the two companies said on Monday, in the biggest step overseas yet by the growing Chinese auto industry. But the move is likely to generate new controversy about Chinese protection of intellectual property.

The automaker involved, Chery Automobile, has been at the center of disputes with General Motors and Volkswagen over whether Chery has copied their vehicle designs, allegations that Chery has repeatedly denied.

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

Alado, which is a closely held company with links to BSA International, a Malaysian manufacturer of alloy wheels, announced on Monday that it would 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.

The goal, Alado said, will 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.

A Chery spokesman confirmed that the company would build the factory in Malaysia but declined to provide any details. Chery is based in Wuhu in Anhui Province and is owned by the provincial government.

The plans by Alado and Chery represent the first big step 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 state-controlled automaker, Malaysia is now starting to yield to pressure from other Southeast Asian nations to dismantle steep import duties on assembled cars.

"Chery is taking advantage of Malaysia having to open up," Blokland said, adding that two small Malaysian makers of small, inexpensive cars, Inokom and Perodua, were likely to be more affected than Proton, which builds larger models.

Malaysia is the largest market for passenger cars in Southeast Asia, with more than 300,000 a year sold. But Malaysia trails Thailand in overall light vehicle sales because the pickup truck market is much smaller in Malaysia than in Thailand.

GM 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 minicar introduced last winter in China.

GM holds a controlling stake in Daewoo.

Rob Leggat, vice president for corporate affairs of GM Daewoo Auto & Technology, said in a statement that while GM 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."

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

Volkswagen had no immediate comment on Chery's plans to begin assembling and selling cars in Malaysia.