chery
Source: Blacktown Advocate, Chery J11

Chery's bold move into Australia underlines how China's largest automakers are starting to look beyond emerging markets for growth.

China's largest homegrown carmaker - which began shipping its first batch of vehicles to Australia last week - aims to sell 5,000 units in the country by the end of this year, as well as double its dealerships to 90 outlets in two years. But Chery won't be the first Chinese-branded automaker to enter Oz: SUV manufacturer Great Wall drove into the Australian market in 2009, and hopes it will serve as the gateway to Europe and the US.

As Chery said in a statement earlier this week: "The top market players include Toyota, Holden (a brand under GM), Ford, Mazda, Hyundai and Mitsubishi. Given this fact, landing in Australia is of great symbolic significance for Chery to expand its overseas operation and to deepen brand internationalisation...[It] serves as a touchstone for Chery to make massive entries into developed markets such as West Europe and North America in the future."

An increasing number of Chinese automakers are looking beyond China for growth, though the majority have expanded mostly into emerging markets. BYD, Chang'an and Jianghuai Automobile, for instance, are moving aggressively into Brazil, securing big contracts with local dealerships and offering cut-throat prices.

As China's largest auto exporter, Chery shipped 91,986 vehicles overseas last year, accounting for 13.5 per cent of its overall sales, according to Reuters. These shipments went mostly to eastern Asia, Latin America and the Middle East.

Still, grabbing a larger piece of Australia's auto market won't be easy: Indeed, Chery offers competitive prices -- its "cute-looking" 1.3-litre, five-door J11 hatchback is only $12,195, compared to a similar Mazda model for $22,000 -- but Japanese and South Korean brands such as Mitsubishi, Toyota and Hyundai still dominate.

But the success and preference for Asian cars in Australia could also be a reason why Chery has targeted the country as the first developed market to enter. Australian consumers, known for their traditional love of big cars, are beginning to change their buying habits, and Chery's entrance into the local market would help to spur this shift in consumer preferences, industry experts have said.

Safety concerns could also pose a problem for Chery: even on the mainland, foreign cars still account for more than 60 per cent of overall sales, due in large part to safety concerns. The Chinese simply trust foreign branded cars more than their own, according to Credit Suisse analysts.

See also:
Speed bump ahead for car sales in Asia - FT Tilt