Chinese carmaker Chery eyes UK factory this decade

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Chinese carmaker Chery is considering building a car factory in the UK this decade, as it prepares to enter the market in 2024, according to one of its top executives. 

China’s ninth-largest automotive group is set to launch a range of petrol, hybrid and electric cars in Britain under its mass-market Omoda brand in the spring with its premium line-up, badged as Jaecoo, following in the summer. 

Chery UK boss Victor Zhang said the company was aiming to rival Korean mass market carmaker Hyundai and Kia, which first entered the British market in the early 1980s and early 1990s, respectively, and now account for almost one in 10 cars sold in the UK combined.

The state-owned company is exploring building two European factories. One would produce right-hand drive models for the UK, as well as the smaller Irish market, while a second would produce left-hand drive cars for the rest of the continent, he said.

“At this moment, we have car manufacturing in China, but as volume grows in the near future, of course local production is a very important consideration,” he told the Financial Times. 

Brexit and the size of the market meant that the Chinese company was considering a separate plant in Britain rather than just one dedicated European factory, he said, adding that the company had begun initial discussions to explore the options. 

“We are still thinking from the investment point of view, the UK should do a separate plant,” he said. “The UK itself is big enough, with 2mn market demand.” 

A commitment to full-scale manufacturing in the UK would provide a welcome boost to the industry, which saw Japan’s Honda close its plant in Swindon two years ago in the wake of the Brexit vote.

Four of the five big carmakers with UK plants — BMW, JLR, Nissan and Stellantis — have committed to new electric models in the past year, while Toyota recently said it was weighing up further UK investments, including a new model. 

US electric carmakers Rivian and Tesla had previously considered UK-based manufacturing but opted against it, while China’s BYD said Brexit meant it would not consider the country for its main European plant. 

Chery’s Chinese rival Geely is already a significant investor in the UK with a controlling stake in sports car maker Lotus as well as owning LEVC, maker of the famous black cabs. It also recently opened a large research and development centre for Polestar, the electric vehicle brand owned by Volvo, the Swedish carmaker acquired by Geely in 2010.

Carmakers typically need a production run of at least 100,000 vehicles a year to justify building a plant. Chery would need to match Kia’s UK market share of 5 per cent to achieve those sales annually. 

A potential UK plant would focus on electric cars, but could also produce petrol and hybrid models for both of Chery’s brands, depending on demand, Zhang said. “We are trying to offer a full range of powertrains for customers,” he said.

He suggested a UK factory could also export cars to other distant left-hand drive markets in South Africa, Australia and New Zealand.

He said senior Chery executives had made initial contact with the government about a UK manufacturing base after a British delegation travelled to China in December. The government declined to comment.

He said a final decision on a UK factory would be taken in the “near future”, though he stressed that the group had yet to consider specific locations. “[In 2024] we start the launch for sales, it would be two, three, four years to grow up to a certain [volume],” before requiring a dedicated UK plant, he added.

Like other Chinese carmakers coming to the UK, Chery plans to use established dealership networks to sell its Omoda and Jaecoo brands. It has deals with Arnold Clark, Listers and Endeavour and plans to offer a seven-year vehicle warranty and eight-year battery warranty on its models to try win over buyers to the new brands.

The company also plans to price its vehicles close to Hyundai and Kia models, rather than undercutting other mass-market brands, a strategy some rivals had feared because of Chinese carmakers’ lower production costs. 

“I don’t think we are just trying to frighten others with the cheapest price, this is not something we want to do,” said Zhang. “We just want to bring good products with a good brand.”