Chery Automobile Co's local factory in Brazil will be officially launched this August, making Chery the first Chinese automotive producer to build its own production foundation in this country. Provided to China Daily

Chery Automobile Co's local factory in Brazil will be officially launched in August, making Chery the first Chinese automobile producer with its own production facility in the country.

The factory is in Jacarei, a city close to Brazil's financial center of Sao Paulo, with a construction area of 400,000 square meters. Chery initiated the construction in 2011 with a total investment of $400 million.

"After the launching ceremony in August, we will start a series of tests and adjustments, and hopefully can initiate the standard operation procedure in November," said Peng Jian, president of Chery Brazil.

It will be Chery's only self-owned factory in the world. "The estimated producing capability of Chery Brazil's factory can reach 50,000 (vehicles) per year. Latin America occupies more than 30 percent of Chery's international market, and I have very strong confidence in its future development," said Du Weiqiang, vice-president of Chery International.

Chery launched its first off-tool sample car manufactured by its local factory on June 22. "It marks major progress of Chery's international strategy and shows our confidence in the Brazilian market," said Du.

The new factory will provide about 800 jobs by the end of 2014 and about 40 Chinese engineers have come to Brazil to train local employees. "More than 70 percent of Chery Brazil's employees are local Brazilians and the percentage is expected to reach 90 percent in the future," said Jian.

"Local employees are the core power of Chery Brazil's development in this country. Our goal is to combine the Chinese culture, Brazilian culture and Chery culture together and stimulate our development," said Peng.

The factory will be Chery's Latin American production base with its products exported to other regional countries, including Argentina, Chile and Uruguay, he said.

Chery entered the Brazilian market in 2009 and has built 75 4S car shops across the country. "With the new factory, we hope to enlarge our local market share to 3 percent by 2018," Peng said.

Brazil is the fourth-largest automotive market in the world and South America's largest. "We have been very interested in this market since we put forward the ‘going-out' strategy in 2006," said Peng, "we spent one year to analyze this market and decided to build our foundation here."

Besides Chery, JAC , Geely Holding Group and Lifan Industry also have entered the market to produce family cars and commercial vehicles.

Meanwhile, BYD Auto will provide electric buses to Brazil and the company will invest $100 million to build a factory in Sao Paulo.

Industry statistics show that among the 51 automotive brands in Brazil, 12 are from China, making it the largest auto exporter to the country.

After the Brazilian government increased the tax rate on imported vehicles by 30 percent, foreign automakers including Chinese companies adjusted by building factories in Brazil.

Industry observers believe the move will help to guarantee better after-sale service and win the trust of Brazilian customers.

Further development of Chinese auto-manufacturing in Brazil still faces many challenges. Local media reported, for example, that Brazilian vehicle sales saw a 1 percent decrease in 2013, marking the first decline in 10 years. The trend is expected to continue.

Observers think that with more foreign automotive companies building factories in Brazil, the country is likely to face an overcapacity problem by 2017, when production is expected to reach 6 million vehicles per year.

"Even so, we still have confidence in the Brazilian market because Chinese vehicle companies have advantages," said Wang Quan'an, president of the Institute of Portuguese Language Countries.

The key solution for Chinese automakers, Wang said, is to develop "core technology". New-energy vehicles and mass-transportation vehicles will play a very important role for Chinese companies in the local market, Wang said

"We need to encourage our own brands to enter and pursue further development in foreign countries. There is still a long way to go," said Wang, a former commercial promotions officer at China's commerce department.

fanzhang@chinadailyusa.com