China Daily’s TianYang has a great round up of the news that has been befuddling China’s automotive media for the past week. Chery announced previously that it was to end production of the Riich and Reely models, but one Chery executive think there are still miles to be tread in the as of yet unworn in brands and plans to put them into production in a new facility in a province over from Chery.
As Chery Automobile Co trims its lineup in an attempt to restart growth, an all-new carmaker could to emerge from the models it has abandoned.
According to recent domestic media reports, Chery’s co-founder Lu Jianhui has brought some 200 staff members to start a new auto company in Chery’s home city Wuhu, Anhui province.
Not yet registered, the new company will have a designed annual production capacity of up to 700,000 cars – some reports say 330,000 – and is expected to begin production in 2015.
The first model will be a subcompact car developed by Chery, the reports said.
The news came after Chery announced in April it will drop its multi-brand strategy. At its most ambitious, the carmaker had four brands and more than 20 models as well as 130 ongoing R&D projects.
But the costly strategy failed as sales continued to decline over the past two years.
Once the sixth-largest domestic carmaker, Chery even fell from the top 10 list in terms of sales in the first half of this year, surpassed by former followers Brilliance Auto, Great Wall Motors, JAC Motors and Geely Automobile, according to statistics from China Association of Automobile Manufacturers.
In an effort to rebound from years of stagnant performance, the company plans to retain only its namesake brand, reduce its lineup by half to 11 or 12 models, streamline operations and cut costs.
Analysts generally believe that the automaker is on the right path with its “One-Chery” strategy, but they are doubtful about the prospects for the new spin off car company.
They note that the central government has been calling for consolidation in the auto industry and is not likely to approve the new project, and even if it gets the green light, whether it will find a place in the market also remains in question.
Chery’s previous models included the Riich M1, G3, G5 and G6, all of which were fairly decent cars but failed to gain any sales in any sort of meaningful number. Perhaps under yet another new brand the models could succeed, but China is a crowded place and the dealership network has likely been thrown in to disarray.
Another final point:
Zhu Bin, an analyst with LMC Automotive, said “it doesn’t make sense to use old models for a new brand”.
This didn’t stop Nanjing MG from bringing back the Rover 75 and the MGTF in the UK market.
