Firms venture into North Korea

Asia Times

Chinese auto maker Brilliance Auto recently signed an agreement with PMC of South Korea on jointly launching an assembly plant in North Korea.

The North Korean facility will be Brilliance Auto’s third after its operations in Egypt and Vietnam.

Brilliance Auto is neither the first nor the most active of the Chinese auto makers making direct investments abroad. Quite a few have already done or are doing so. Among them are Chery, Geely, Jianghuai, Chang’an, Great Wall, and BYD Auto, which have launched greenfield auto plants abroad, and Shanghai Automotive and Nanjing Automotive, which have invested abroad through merger and acquisition.

Chery is a leader in this regard, making great efforts on building CKD (complete knockdown) factories abroad in recent years. Aside from the existing assembly plants in Iran and Russia, it is looking for such opportunities in Egypt, Romania, Turkey, Indonesia, Italy and Argentina. Its Argentina joint-venture project with the local Socma group, involving investment of US$100 million, will be controlled by Chery. If it goes ahead, it will be the first China-invested auto venture in South America. Chery plans to own 12 assembly plants worldwide within a short time.

Geely also has been active in going global. It has invested in Malaysia and is preparing for another new factory in Russia.

Jianghuai, meanwhile, has established light-truck assembly plants in Vietnam, Malaysia and Indonesia.

Industry analysts hold that excessive capacity in the domestic market after rapid expansion in recent years is prompting Chinese auto makers to look for overseas markets. However, they are often hit with tariff barriers from the importing nations. For instance, Russia levies about a 25% tariff on complete vehicle imports, but only about 3% on knockdowns.

Direct investment overseas is regarded as a solution to such barriers.

So far, the overseas investments of Chinese auto makers have been concentrated in emerging markets such as the Middle East, Southeast Asia and Africa.


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