Chery's RM1 Billion Investment: A Bold Move in Malaysia

With an investment of over RM1 billion, Chinese automaker Chery International is making a noteworthy comeback in the Malaysian market. This signals a change in strategy, which was depending on local distributors to have a direct market presence.

Malaysia: A Strategic Asean Automotive Hub

Chery wants to establish Malaysia as the centre of its Asean activities, focusing on both domestic and international sales. As a result, local parts suppliers Feytech Holdings Bhd and DRB-HICOM Bhd stand to gain from this strategic decision.

Affin Hwang Capital's automotive analyst Afifah Ishak points out that Chery's strategy involves focusing on right-hand drive markets like Australia, Singapore, Thailand, and Brunei. With an predicted annual growth rate of 189%, the company hopes to start exporting 500 units this year and reach 12,000 units by 2027.

New CKD Plant in Shah Alam

Chery's presence in Malaysia is strengthened by the establishment of its CKD (completely knocked down) plant in Shah Alam with an investment of RM125 million. The plant, which began operations in June this year, will CKD the Jaecoo J7 SUV, house a training centre, and an R&D centre.

Afifah further added that the Shah Alam factory is currently running at 50% capacity of its 35,000 unit yearly output capability.

Continuing Operations at Inokom Kulim CKD Plant.

Despite having its own production facility, Chery will maintain its assembly operations in the Inokom plant in Kulim, Kedah. The assembly of four SUV models - the Tiggo 8 Pro, Tiggo 7 Pro, Omoda 5, and the Omoda E5 EV - will remain here.

Additionally, Chery intends to increase its capacity at the Inokom factory. This, however, will take time as Chery does not have any equity stake in the plant jointly owned by Sime Darby (51%), Bermaz Auto (29%), Hyundai Motor (15%) and Sime Darby Hyundai (5.0%).

Afifah also noted that presently about 15% (6,000 units) of the factory's total capacity of 38,000 units is allocated towards production of Chery vehicles.

Embracing a Multi-Brand Strategy

Chery is implementing a multi-brand strategy in Malaysia, introducing sub-brands such as Omoda and Tiggo in 2023, followed by the launch of Jaecoo earlier this month. Both Chery and Jaecoo are operated as separate entities with its own offices, management team and dealer network. Another sub-brand, Exeed, is slated for launch by 2027.

In addition, Jetour, another brand under Chery International, will be launched later this year after having showcased two of its models - Dashing and X70 Plus at the recent MAS2024 exhibition. Jetour will be operated as a stand-alone entity by a distributor with its own dealer network and management team not related to Chery Malaysia.

Future Prospects

According to Afifah further, after having experience in the Malaysian market, Chery is now using its ASEAN aspirations to open up new doors for Malaysian auto suppliers. Chery's efforts are already paying off, as seen by the localisation rate of 57% for automotive parts - above the 40% threshold set by the National Automotive Policy 2020.

Chery Malaysia's supply chain is mostly dependent on Malaysian suppliers, including DRB-HICOM, APM Automotive Holdings Bhd, and Feytech Holdings and its operations in Malaysia and the broader Asean region has a promising future thanks to this sizable investment and these thoughtful moves.