Free Essay

Chery Automobile

In: Business and Management

Submitted By reshamdhakal
Words 3039
Pages 13
De Montfort University
In partnership with
Niels Brock,
Copenhagen Business College
BA (Hons) Business Administration.
Market analysis of
Chery automobile
Submitted by: Resham Dhakal instructor : Ian choo
Student No. P11016315
(CORP eve)
Date: 2011-11-14

1 Introduction

The main propose of this preliminary project is to analyses the present situation of Chinese automaker ‘Chery Automobile Co. Ltd. In order to analyses the present situation, we mainly focus on its internationalization process, its domestic market as well as international market, and its strategy of growth. And it is supported with different theories such as SWOT analysis, PEST analysis, Porter 5 Forces, 4Ps.
1.1 Chery at a Glance

Chery is one of the Chinese fast growing state owned enterprise founded on 1997.with a capital of CNY 3.68 billion, and its first car came on a production on 1999. At present Chery owns for sub-brands, chery, karry , Rilich and rely. Currently Chery has 16 different module in maket and it possesses an annual production capacity of 900,000 automobiles. (Chery) . With the strategy of ‘Going out’ Chery become the first Chinese automobile company to export its production in overseas, including more then 80 countries. It offers cars, sedans, SUVs, and mini-vans on its different segment. Source – Chery International Co. ltd
This figure show that, the total sale of Chery automobile is been increasing in every year, in the year 2008 its sale is 356,000 unit which is decrees by small present comparing to 381,000 on previous year 2007. Competition is the causes as Chery Chairma Yin Tongyue said “Competition in the Chinese automobile market would be extremely fierce this year” (Reuturs, 2009) and due to the effect of global recession.

2. Chinese auto market Source- china car times
According to the, china car times. Top 3 leading automobile companies, Shanghai GM, Shanghai VW and FAW-VW sold 92,700. 84,700. And 79,300 respectively. Whereas Chery automobile sold 54,400 covering the market share of 4.9%

3 Internationalization of Chery

Chinese largest automobile exporter Chery started its internationalization process in 2001 by exporting the first car to Syria, with the strategy ‘going out’. Since 2003 and has become a leading Chinese Independent brand in the international auto market. Basically exporting and local production is seen as a major entry strategy of Chery. With in the 10 month of this year Chery has breaking the record of highest export 135,000 unit and expected to rich 160,000 units (Chery 2011)

Internationalization of Chery automobile Corp time Event Significances
Oct.2001 First export to Syria First step in international computation.
Aug. 2003 Project with Iran First step of international co-operation, establish factories abroad
Dec 2005 First oversea subsidiary in Russia Become a most popular brand in Russia
Sep 2008, 8th Chery overseas plant in Malaysia Covering east Asia
July 2009 9th overseas plant in brazil. 400m USD investments for new plant. Capacity to produce, 150000 annually.
April 2011 500,000 cars sold overseas Source. Chery international

source- ceders 2011,. the export data of 2010 show that , chery , changen and great wall show up as most internationalized automobile companies , however the export figure shows that chery on the top with 17%. source- ceders 2011,
Above chart shows that, major 10 market of cherry is Middle East, South America and Russia. All of those countries were developing countries with middle income. This is one of the export characteristics of Chery automobile.’ Developing countries first then develop countries” until 2015 the company will focus on South America and Russia as a major export market (Chery international).
10 world’s largest auto market.
COUNTRIES 2010 SALE IN MILLION FORCAST 2011 IN MILLION GROWTH %
ITALY 2.1 2.0 -6%
UNITED KINGDOM 2.2 2.2 -1.8%
RUSSIA 1.9 2.4 20%
FRANCE 2.6 2.6 -0.08
INDIA 2.7 2.9 7%
GERMANY 3,1 3.4 10%
BRAZIL 3.3 3.5 5%
JAPAN 4.8 3.9 -19%
UNITED STATES 11.5 12.6 8.7%
CHINA 17.2 17.7 3%
SOURCE- CNBC, BY RAJESHNI NAIDU 2011,
Russian , Germany , brazil, Indian us and Chinese market seem to be the biggest market fro any automobile companies, consumption rate is increasing on those market , this could be the opportunity for automobile industries .
Key market.
Brazil is Chery largest market followed by Russia and Ukraine. Chery’s strategy to focusing South America and Russia as the key market. In South America, Brazil is one of the “ must win market “ for any automobile companies including Chery. Worlds 4th largest auto market brazil, is forecasting that the consumption of automobile will be raise by 5% in 2011 compare to 2010. With a population of 192 million people, only 30 million people can afford car. Car companies expect sales to boom as the country’s middle class grows. (cnbc 2011) For Brazilian market, Chery strategy is based on product, aim to offer cost –effective and adoptable product. Chery first module in Brazil was lunched in 2009 and it was top 10 monthly SUV ranking in Brazil by feb 2011. For Brazilian consumers, Chery has been a fashionable, cost-effective and quality international auto brand. In the “Models of the Year 2009” (Chery, news release, 2011) “ Brazil is increasingly becoming one to het world’s most important market and no company want to be left out”. He added more saying that, ‘ Chery has investment 400 m USD to developed new plant in Brazil and this is their biggest investment outside china and will be base of export for all of South America’. Chery started selling car in Brazil in 2009, In 2010 sale was 10,000 units and in 2011 is expectation to grow the sale and hit 25,000

4 Market analysis.

4.1 SWOT Analysis

In present time Chery International automobile is one of the most successful Chinese car industry. Chery international has a good business portfolio, and there corporation is an innovation mode. And they increasing demand for cars market, although “made in China “has brought a negative impact on the product reputation. And in present competition are growing fast and also other government regulations becomes threats for them.

4.2 PESTEL Analysis

Political: In 2004, the Chinese government introduced a . The January 2009, Chinese government introduced , then is facing a financial crisis, the policy for the auto industry once again had a major revision. We can see that Chinese aware of the car as a huge industrial chain for the entire economic growth, social development, the important role of consumer habits, the introduction of Auto industry policy shows a clear shift in emphasis on several key dimensions. The one feature stands out is the requirement that foreign VMs operating in China, so in 50:50 JV with domestic companies. The 50% cap on foreign participation in vehicles assembly was highlighted in the 2004, policy much to do the surprise of industry observers who were anticipating its abolition. The imports of small cars to China are 25% tariffs and 17% value added taxes.

Economic: From the chart below, in 2009, 13.79 million motor vehicles were manufactured in China, surpassing United States as the world’s largest automobile producer by volume. In 2010, both sales and production topped 18 million units, with 13.76 million passenger cars delivered, in each case the largest by any nation in history

] And the GDP of China recently years is below:

Social: Since reform and opening up, the living standard of people has been improved rapidly. Early car culture was based on “face” success was measured by the displacement badge on the back of your car, Vs were held in high regard but the increasing price of gasoline changed this habit rather quickly, now small displacement turbo engines are the way forward for many users. Hatchbacks were not popular for quite a long time, as they were demand unsafe due to the lack of an impact area in case of a crash whist sedan versions of existing hatchbacks looked like marginally bigger vehicles yet again giving more “face” for less money. As the 80s and 90s generation take to the roads en masse due to the supply of low cost cars that can be picked up new for as little as 40000 RMB on the road (and including taxes), the automobile is all about delivering freedom. China changes taste for cars---small is the new big.

Technology:
Chery, the largest independent automobile in China has officially standard the construction of its battery separator plant in Wuhu national Hi-tech industrial development zone, local media reports. Neighboring Chery new energy vehicle technological, the battery separator plant was jointly establish in August 2010 based on an agreement signed by Chery and Taiwan IT and new energy vehicle materials giant Ben Q. According to the joint venture agreement Chery and Ben Q would join hands to develop and manufacture isolation membrane material applied for lithium power batteries in this 50:50 joint venture, the trial production is expected to begin in 2012.

4.3 Porter 5

Consumer analysis

Individual consumer

Based on the auto sales statistics for October 2011. Chery with its car "A1" had arising 347% than last October(newsletter 2011). In this situation, Chery as a new car maker which has perfectly to be a part in Chinese auto market. Due to the limited income level,Chinese would prefer the cheap but good quality car to match their need. Obviously, the products of Chery attract the Chinese individual consumers. The Brazilian market, the sales of Chery reached 10,000 vehicles at 2010, and expect to hit around 25,000 in 2011(Paulo 2011).

Organization consumer

As a developing country, Chinese and Brazilian governments/companies may need cars for business and construction. Therefore, Chery would rush up the efficiency of its business with the advantage. For example, Chery win a bid from the government on November 13, 2011. Chery is going to offer 400 vehicles to Egypt. (Anhui China)

a. Industry rivals anlysis

In Chinese market, we are going to choose Chang’an Automobile Co., Ltd. which has same characteristics with Chery generally.
Changan group has location its headquarters in Chongqing, and being one of the biggest car maker in China. Its smaller car named ERA CV6 which designed for low income poeple by Changan is one of the cheapest car. This car cost 35 thousand CNY , for encouraging those low income people to consumption. For the similar type, Chery's QQ would cost around 30 thousand, though the configurations are worse than CV6.(Changan) The advantages of domestic auto producers:
 Favorable geographical position - local auto producers can easily transfer their products to the destination.
 Feedback the customers' requirements quickly, and provision of the services.

To join the world competition, the pressures are not just from the local companies, but also foreign competitors.
For instance, Ford Motor, one of the leaders in the industry.
In 1997. Ford Motor funded Ford China as its subsidiary in China. By supported with Ford Motor's technology and global strategy , Ford China has successfully set up its own factory at Changan (Ford China). And Ford Brazil, the main factory in Camaçari, uses around 500 robots to make 250 thousand vehicles per year.(Ford Brazil)
Up to now, Ford main products in China and Brazil are Endeavour, Fiesta and the Figo.
The advantages of foreign companies:
 Plentiful funds, great scale and mighty development strength.
 Complete production lines for vehicles products. This line includes from design, to producing, thus, selling. Every details, the foreign companies have much more experience.

Suppliers, Substitutes and New entrants.

The main part of the vehicles, like engine or transmission, the physical requirements of them are high. However, due to the competition in the vehicles industry is becoming stronger and stronger and the technology deceloping, many new suppliers have joined in this battle and make the cost decrease. And some vehicles companies have start to manufacture their own engine or transmission. So the bargaining power from suppliers is quite low in the industry.

At the current, the demand of low cost car based on the income level of developing countries. Though, there are some new technology products or new concept to the vehicles, like friendly environment car, they will not effect the buying behaviour of those people with low income.

As a developing country, Brazil and China, for absorbing the funds, the entry barriers for foreign companies are lower than before. Therefore, so many foreign companies had or plan to entry. Under the lead with WTO and the economic globally, the barriers will be lower and lower, thus the threat of entry will be higher and higher.

4.4 4Ps

• Product
Chery’s four sub-brands Chery, Karry, Riich and Rely products cover passenger vehicles, commercial vehicles and minivans, with 16 different modules. Chery QQ is the star/core product
• Price Chery’s low price strategy is one its competitive advantage to grow its market with costumers of high price sensitive. In a high competition market like Brazilian and Chinese, costumers are more likely to be high price sensitive Compare with other competitors, Suzuki, Toyota, Fiat, Peugeot, Citroen, Ford, and Volkswagen

• Place
In domestic market
Chery innovate the marketing mode characterized with network marketing. In this way, it not only strengths the control capacity of the market, but avoid unfair competition and internal friction in resource, moreover, it greatly enhance the ability in marketing services, enlarges Chery’s marketing network, so that Chery's marketing network can cover both the developed towns and undeveloped counties, thus, it lays a solid foundation for yearly fast promotion in Chery's marketing; advocate both development in quality and service, stimulate brand leap, realize three strategic aims of "brand leap, quality leap and service leap"; by building Chery brand, while standardize the core information for product, deliver product positioning and its selling points to customers, it also benefits the customer in clearly finding out suitable products according to their own needs among complex automobile market.
Chery gradually establishes and perfects the after sales service system which is to "enhance customer satisfaction as the goal" and its service network covering 31 provinces, autonomous regions and municipalities at home. The intensive service network enables Chery's after service more timely and quickly, which helps to create "more convenient, cheaper and more satisfied" reputation for Chery's service.
In oversea market
They have some oversea factories. They are in Uruguay, Indonesia, Malaysia, Thailand, Iran, Egypt, Ukraine and Russia. They formed global network.
Chery is actively carrying out its globalization strategy. It has exported its cars to more than 80 countries and regions all over the world and the number of CKD factories built or being built is up to 15. Through the radiating capacity of these production bases, the auto markets of Asia, Europe, Africa, South America and North America will be ranged over in depth.
• Promotion
Chery takes care on the technique, quality and service. As the same time, Chery also do some activity on selling, discounts for hot selling, it means low benefit more sale. They also often hold some program, like having an experience using the automobile, some automobile match, sponsor some institutions, pushing new product all the time.
Some gifts (insurance or Sideline range of products) for you when you buy the automobile, focusing on CSR, I think it is another way to promote their product, they support earthquake relief work, Olympic Games; set up Hope Primary Schools, on the hand of their product, they offer customers more safe, more energy-saving and more environmental protection automobile.

units .( market watch 2011)
Chery increased its market share to 1.1% in mid-August from 0.15% in May last year.

5 Conclusion

As one of the most influential and famous auto brand, Chery Auto had achieved extraordinary growth rate and had become the pride of Chinese national automobile industry It has 4.9% market share in Chinese market. With ‘going out strategy’ chery has growing very rapidly in global market, focusing on developing counteries. Its sales, foreign investment shows that Brazilian market is very important fro chery’s future growth. . Chery has potentiality regarding to manufacturing, low prize strategy, new product development. But the certain issues like, innovation , safety, brand image are needed to improve.
At current, the barriers for industry globally are becoming lower ,the demand of car are raising and short of the substitute, face to the strong competition in the automobile industry, so Chery do have its own advantage with its own R&D .
Chery has a star product (QQ), so revolve around QQ, Chery innovate many products about QQ. Chery will keep low price strategy in the furture. In domestic and oversea market

Reference
1. Chery, 2011. Overview, online available on ( http://www.cheryinternational.com/company.ph http://www.cheryinternational.com/chery-china.php http://www.cheryinternational.com/Chery-International.php
Accssed on 9 dec 2011.

2. Chery , 2011. Development strategy, online available on http://www.cheryinternational.com/strategy.php accssed on 5 dev 2011.
3. RAJESHNI NAIDU ,2011. World’s 10 largest auto market.CNBC. online ,available on on, http://www.cnbc.com/id/44481705/World_s_10_Largest_Auto_Markets?slide=1
Accessed on 7th dec 2011.

4. China car times, 2010. top ten sellers in September,online,available on http://www.chinacartimes.com/2010/10/13/top-ten-sellers-in-september-byd-f3-gone-from-the-list/ accessed on nov 13th 2011

5. Wei Michael,2009.China's Chery 2008 car sales drop Reuters,7jan, online available on http://www.reuters.com/article/2009/01/08/retire-us-chery-sales-idUSTRE5070IK20090108 assessed 10 dec 2011
6. Winterstein Paulo,2011 China's Chery Will Build Cars in Brazil,the wall street journal ,july 29 available on http://online.wsj.com/article/SB10001424052702303795304576456361323706244.html accessed on 12 nov.2011
7. Ceders, 2011. xecutive Summary of Chinese Automotive News. ESCAN weekly 138. Online , available on http://www.cedars.cc/DownloadFileInfo/&id=b8d2e73c-3643-4974-a422-9847e0efd198&comp_stats=comp-FrontDownload_list-666.html accessed on 12 nov.

Anhui China http://apps.ah.gov.cn/showcontent.asp?newsid=3121 Changan http://www.changan.com.my/about_company.html Ford China http://www.ford.com.cn/servlet/ContentServer?cid=1178852420404&pagename=FCN%2FDFYPage%2FFord-Default&c=DFYPage&site=FCN Ford Brazil
http://www.ford.com.br/?referrer=http%3A%2F%2Fwww%2Eford%2Ecom&glbcmp=ford%7Caboutford%7Cfordglobal

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