Strategic Growth Plan For Chery Automotive

3161 words - 13 pages

AbstractRanked the number one Chinese exporter of passenger cars, the fourth largest manufacturer of passenger cars in China and the top seventh automobile manufacturer, Chery has come a long way from its underdog days in the Chinese automotive industry. With the threat of increasing costs and shifting market demands, Chery can capitalize on its partnerships and marketing know-how by expanding its distribution network into developing economies and targeting China's emerging middle class. This will set the stage for Chery to enter North America as a proven manufacturer, with proprietary technologies demanded by North American consumers.The automotive industry is one that has seen tremendous growth in recent years. In the first five months of 2008, 4.5 million Chinese-made automobiles were produced and sold, and the China Association of Automobile Manufacturers estimate that total auto sales will exceed 10 million units, representing a full 14% annual growth (China Daily, qtd. in China Car Times). Production increased 17.05% from 2007, while sales increased 18.91%. This growth is also seen on the global scale. As of 2005, China became a net exporter of automobiles, and in 2007, it exported more than 500,000 cars and trucks to Africa, Eastern Europe, Latin America, Russia and Southeast Asia. 70% of these exports bore China brands. (Gao, 2008). An understanding of the industry and its environment forms the first step of the strategic analysis for Chery.The first component of the external environment is the societal environment. The PEST framework will be used to scan the industry's macro-environment.On the political front, car manufacturers are restricted and regulated by numerous government policies. China's policy in limiting foreign ownership in the automotive industry has allowed Chinese firms to benefit from foreign partnership without giving up majority control to foreigners. The Chinese government has also instituted limitations on financing packages due to increases in the number of defaults. As with other countries, China is also concerned with environmental impacts. The Chinese government is encouraging the development of clean and fuel efficient vehicles, as well as other systems to reduce average fuel consumption. China's adoption of the low carbon economy has resulted in policies such as the consumption tax on cars with larger engines (Reuters, qtd. in China Car Times). Intellectual property regulations and international business regulations also play an important role as Chinese firms begin to compete on an international level.Economically, the outlook for China is not optimistic. In June, Chinese stocks fell, with the CSI falling by 8.1%, resulting from rising fuel, food and commodity prices. Automotive sales were also impacted when the government increased oil prices in June 2008, and sales growth was smaller than anticipated. Within this threat is also an opportunity for automakers that have invested in alternate fuel sources, as the...

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