Chinese steelmaking giant Baosteel and Anhui Province-based auto manufacturer Chery Automobile Company signed a strategic cooperation agreement on November 9 at Chery's premises.
More than typical supply and cooperation deals, this latest agreement is characterized by far closer collaboration between a steelmaker and an automotive producer, with "steel laboratories" to be made available to Baosteel at Chery's facilities. At these laboratories, Baosteel will carry out its R&D on auto steel and apply its findings directly during the car manufacturing stage.
According to the agreement, on the basis of current steel sheet supplies, logistics and steel sheet processing, the two parties are to deepen bilateral cooperation. The most important content of the agreement is that the two parties are to cooperate by way of co-investment. For all of Chery's new projects, including R&D for new types of vehicles, designs and updating of auto parts, Baosteel and Chery are to carry out joint investments. In addition, communication and sharing of technologies and information will be further expanded.
Under this new agreement, all steel used by Chery is to be supplied by Baosteel so long as Baosteel is capable of supplying the necessary quantities. Furthermore, Baosteel will have the opportunity to test and apply its innovations in the auto steel industry and thereby will be in constant receipt of prompt feedback.
In addition to the cooperation agreement with Baosteel, Chery has also signed agreements with Maanshan Steel and POSCO for steel supplies for its passenger car manufacturing plant. The company is planning to increase its capacity from the current 500,000 vehicles to 1.5 million vehicles in 2010.
Chery was founded by five Anhui-based state-owned investment companies with a registered capital of RMB 1.75 billion ($235.53 million) in 1997. In 2006, it achieved a sales volume of 305,200 cars, an increase of 62 percent over the previous year. Its performance maintained a good trend in 2007. For the moment, it has a 6.3 percent share of the Chinese passenger car market, ranking fourth in China.
Chery is the leader among China's independently-managed native car enterprises, As such, it is different from others car brands which involve joint investment by Chinese and overseas sources. Therefore, it obtains more support from both the government and the people of China. Baosteel's cooperation with Chery is widely regarded as the convergence of two native giants.