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The Honolulu Advertiser
Posted on: Sunday, July 8, 2007

China's compact Chery likely to get U.S. upgrade

By Tim Higgins
Detroit Free Press

Chrysler is unlikely to roll out a $7,000 car when it brings the first Chery-made American-brand small car to the U.S. market in 2009, U.S. industry analysts said Thursday.

Rather than hit the streets with a cheap set of wheels, Chrysler and Chery will more likely beef up the Chery A1 to about $10,000 with features and content American consumers expect.

Shortly after the Chinese government gave the OK to a deal between the two automakers, Chrysler Chief Executive Tom LaSorda said his company would begin selling cars made by Chery Automobile Co. in South and Central America in 2008 and in North America by 2009, company officials confirmed.

However, Chery's president indicated that a version of his company's new A1 car will be sold in the United States at a price of $7,000 — half the price of the cheapest Chrysler vehicle on the market today — and that it would be on the road by next year, according to Bloomberg News reports.

Chrysler has not confirmed this and the statements appear to be at odds with what LaSorda said at an official event Wednesday.

The A1 goes for the equivalent of $7,100 to $7,900 in China but Chrysler has not yet set an official export price.

The automakers' messages are unified on the most important matter of the week: Chrysler and Chery are raring to go forward with a partnership that will likely bring the first Chinese cars to U.S. dealerships.

"This is a significant deal," said George Magliano, Global Insight's director of automotive research for the Americas. "I don't think Chrysler can wait around on this thing. Everyone is scrambling to get these programs out there."

Magliano estimates the Chrysler-Chery vehicle will sell for around $10,000 in the U.S. market. "I don't think seven is going to work," he said. "First of all, what's going to sell is not a barebones vehicle. They can do what they want when they sell this thing in developing countries. ... In the U.S. this thing has got to be styled right, it's got to perform right, it's got to have quality, it's got to have safety. And you don't get that for $7,000."

Erich Merkle, director of forecasting for IRN Inc., agreed.

"If I were Chrysler I don't think I would sell it that cheap. I think you could sell it for more ... and make a profit off of it," he said. "Why create a price war if you don't have to?"

Merkle estimated the Chrysler-Chery vehicle will have lots of features, such as glowing cup-holders, a "kick-ass" stereo and other features "younger people expect" and suggested it should sell for as much as $15,000.

"This vehicle probably will be targeted and marketed at the younger generation," he said.

Competition in the U.S. small car market has been heating up as gasoline prices have skyrocketed.

Ford has said it is working to develop a good small car by 2010 for the U.S. market, which already has entries from Chevrolet, Toyota, Honda and Nissan.